Since the end of 2013, US automaker stocks have dramatically underperformed the market.
This bewildered many as auto sales surged on the back of easy credit and the entire industry was proclaimed a great success. However, the reason for the underperformance is simple - stock investors discount the future and with a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years, they know what is coming next.
And worse still, used car prices starting to fade rapidly (biggest Feb drop since 2008)...
Falling used car prices means pressure on new car prices as well, which would be a shock to America's booming auto market.
Obviously, the scariest part about all of the above is that consumers still have the pedal to the metal (pun fully intended) when it comes to leases, which means there's no end in sight to the off-leases and thus no way to determine, at this juncture, how big the residual writedown wave and deflationary auto industry calamity will ultimately end up being.
So, you know... "buckle up."
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Simply put, any pricing power is lost (no matter how long the credit terms are extended) as they are forced to halt production and dump inventories in a vicious deflationary cycle...