🚗 Distress in the auto business has significantly increased over the last few months, indicating broader concerns about the long-term health of the global economy. The latest ISM report for December shows the second lowest performance since 2020.
📉 New orders are crashing, and shipments are cratering, revealing an overcapacity issue in the industry. Car makers globally are realizing that there was no recovery from the pandemic as previously hoped.
📊 Car sales remained decent through last year, but demand has since plunged, particularly in the U.S. market for Japanese cars. Nissan is seeking a merger with Honda to avoid bankruptcy.
⚡ Electric vehicle adoption is not the main issue; consumers are not interested or cannot afford them. Volkswagen's CEO stated, "the market is simply no longer there," reflecting a broader economic reality.
🔄 The auto industry is facing overcapacity and must adjust to a misalignment of supply and demand, leading to more layoffs and factory closures.
📉 The ISM Chicago index plunged to 36.9 in December, the lowest since May, indicating widespread weakness in the economy.
🏭 In Europe, Volkswagen has agreed to cut 35,000 jobs and reduce factory output by almost a quarter. Stellantis is also shutting down plants and laying off workers due to low demand.
🔧 Auto parts suppliers are also affected, with BOS announcing plans to cut 5,500 jobs by 2032. Ford plans to cut 4,000 jobs in Europe, representing 14% of its workforce.
🇯🇵 In Japan, Nissan announced a cut of 9,000 jobs and a 20% reduction in manufacturing output due to overcapacity. Honda and Nissan are exploring a merger under government pressure.
📉 Japan's auto exports are down 3.8% year-over-year, with a 16.9% drop in exports to the U.S. This reflects a lack of recovery and increasing overcapacity.
🌍 The auto industry is a microcosm of the global economy, facing recessionary processes due to overcapacity and a lack of demand. The expectation of recovery has not materialized, leading to significant layoffs and adjustments across the sector.