Automotive Industry Outlook – Focus on Auto Stocks in 2019?

The year 2018 was a difficult year for the global automotive industry and for the German manufacturers in particular. In the first 9 months of 2018, global auto sales only increased by 1.2% to 62.2 million vehicles.

Sales in North America declined, especially in North America, but the sluggish German market also caused problems for the manufacturers. In Germany alone, the number of new registrations fell by 0.2% in 2018 – the first decline in 5 years. Above all, sales of diesel vehicles collapsed after the many scandals in 2018. Specifically, the sale of diesel cars in 2018 in Germany fell by 6.5%.

Outlook for the automotive industry 2019

In addition to the diesel problem, the German automotive industry has another problem: New emission standards such as the WLTP process require further adjustments on the part of the manufacturer. In this way, the indicated fuel consumption in the sales brochures should be based on actual consumption in practice.

In addition, the investment focus of the industry continues to shift towards electromobility and autonomous driving . The German automakers want to set a good example and continue to invest in these areas.

Porsche doubles Taycan production

Porsche was doing well in 2018. Sales increased 6% to 196,562 cars in the first 9 months of 2018. In Germany, business was even better, with deliveries in Germany increasing by 13% to 24,709 vehicles.

Also in the US, Porsche vehicles such as the crossover Macan or the SUV Chayenne enjoy great popularity. Above all, the electrically powered Taycan encounters lively customer interest. Porsche wants to double the production of this electric car from 20,000 to 40,000 units, the electric Taycan should be available by the end of 2019 in the US.

Audi faces big challenges

The year 2019 did not start well for Audi. The employees strike in the largest Audi engine plant in Györ, Hungary. In addition, Audi sales fell significantly in 2018. In concrete terms, sales in the previous year fell by 3.5% to 1.81 million cars. Sales in Europe even fell by 14%. Background were problems with the new exhaust gas test method WLTP.

Despite these problems and sales difficulties in the US and China – where sales fell by 15% and 5% last month – Audi is cautiously optimistic about the new year. Already in March, the new electric Audi E-Tron will be delivered in Europe – it is the first purely electric car model of the Ingolstadt. Audi did not want to mention how many pre-orders there are for the E-Tron, but Sales Director Christian Dahlheim spoke of an “extremely strong” customer interest in the new electric car.

BMW slight sales increase, but no all-clear

Unlike Audi, the Bavarian car maker BMW was able to slightly increase its sales in the previous year. BMW was able to sell 2.49 million cars from the BMW, Mini and Rolls Royce brands last year – an increase of 1.1%.

When winning BMW had to make but last significant cuts. For example, profit in the third quarter of 2018 collapsed by 24% and the operating profit margin halved.

BMW is aiming for a slight increase in sales for 2019, but over the mountain BMW should not be so yet. Market observers expect that BMW must invest even more in electric mobility, autonomous driving and artificial intelligence, the Bavarian car maker wants to achieve its ambitious goals. According to BMW board member Harald Krüger, BMW wants to overtake its competitor Mercedes-Benz until 2020.

Daimler can continue to build on the workhorse Mercedes-Benz

Daimler sold more premium vehicles in 2018 than any other automaker. Only the subsidiary Mercedes could increase its sales in 2018 by 0.9% to 2.31 million cars.

With a new corporate structure, Daimler intends to continue accelerating in 2019. With three powerful units (Daimler Mobility AG, Daimler Truck AG, Mercedes-Benz AG), Daimler not only wants to be more flexible, but also better focused on the individual divisions. Although the costs of the restructuring are likely to amount to a high three-digit million euro amount by the year 2020, the restructuring is expected to pay off in the long term.

Volkswagen concludes global alliance with Ford

Volkswagen (VW) started the year 2019 with a bang. Together with the US automaker Ford VW wants to forge a broad global alliance. Ford will develop in this context medium-sized pickup trucks for VW, these vehicles should come in early 2022 on the market. VW wants to build a city van in return.

In addition, VW wants to become the world’s largest manufacturer of electric drive technologies. In particular, the VW plant in Salzgitter will play a major role here in the future and among other things build the electric motors for the new VW ID series – whose production is scheduled to start in late 2019 in Zwickau. Overall, VW plans to invest around € 870 million in the production of electromobility components this year and next.

Tesla gets going, but questions remain

The US electric car maker Tesla was able to increase production in the fourth quarter of 2018 to 86,555 electric cars, a new record high. The production of the Model 3 is getting better and better – 63,150 electric cars of this type have been delivered to customers.

In total, Tesla sold 245,000 electric cars to customers last year, including 145,000 Model 3 and around 100,000 Model S and Model X. The production climbed in the final quarter to about 1,000 electric cars daily.

In addition, Tesla has recently received green light from the authorities to deliver the Model 3 in Europe. Therefore, the Model 3 should soon be delivered to the first European customers in the coming weeks, in China it should be so far in March.

But there is also headwind: The profit in the final quarter is expected to be significantly lower than in the previous quarter. At the same time, Tesla has introduced austerity measures to cut around 7% or around 3,000 jobs . In addition, Tesla has to expect that subsidies for Tesla electric cars in the US by the end of 2019 completely eliminated. 2019 could therefore be a difficult year for Tesla, which is characterized by further investment.

Conclusion: Automotive industry is facing a major change

No question, the global automotive industry is facing a major change. Car analysts such as Peter Fuß of Ernst & Young expect the industry to overcome the issues surrounding the new emissions test standard in 2019 – the analyst therefore anticipates catch-up effects in the first half of 2019.

Although more than half of the internationally registered patents in the field of autonomous driving are now attributable to German car manufacturers, many manufacturers are not yet prepared for the new mobility platforms (car-sharing, autonomous driving, etc.).

In particular, the traditional sales model of the automotive industry is considered obsolete. Rather, customers in the distant future probably no longer own a car, but order a vehicle or share cars as needed.

Also, the question remains whether the German automakers take the production of the battery cells in their own hands or remain dependent on foreign manufacturers. Auto stocks therefore continue to be a hot topic for conservative investors – this not only applies to German manufacturers such as Daimler, but especially to Tesla .