The car industry is a notoriously difficult one to invest in. Highly cyclical, very competitive, and very very capital intensive. Right now consumer sentiment seems at the lowest point in the decade.
Everytime I lookat a new car model, people complain that the company has lost its way, their new cars sucks, are too expemsive and people brag about their 15 years old car with 200 miles on it.
I am not a car enthusiast but I understand that higher prices and interest rates take a toll on people. But I think at the end they will have to comply with the new industry standards, and the brands still a bit od differentiation allowing companies to charge some margins (car aren't a commodity yet).
This is good news for many legacy cars companies. People have to change cars at some point and the competition isn't doing great either. Even if there is a risk of a price war, I think it's not too great, and many company will retain their margins in the long run. I am sitting on the sidelines for now, but if prices keep falling I might start building a position.
Some may consider EVs as the Levant in the room. But at least with Tesla, EV sales are struggling as much as ICE ones or more. As for China, I think tarrifs will do a great job at hurting consumers and protecting western automakers.
Do you think the industry will recover from this downturn and go back to 2021/2022 level of profitability or do is it going to experience a prolonged crisis?
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