U.S. Stocks Halted After Opening Sharply Lower as Oil Prices Plunge
Markets shuddered Monday in the face of a price war for oil and the economic fallout from the coronavirus outbreak, with frightened investors seeking shelter in the safety of government bonds and propelling yields to unprecedented lows, reports The Wall Street Journal. The S&P 500 fell 7% in the early minutes of trading in New York, triggering a halt known as a circuit breaker. The Dow Jones Industrial Average tumbled 7.3%, or 1,884 points. The Nasdaq Composite Index fell 6.9%.Saudi Arabia’s decision over the weekend to instigate a price war as it escalates a clash with Russia sent oil prices down by the most since the Gulf War in January 1991. The plunge in crude added to two weeks of turmoil in equity and credit markets as investors have grown increasingly concerned about economic growth stalling. It also raised fresh concerns about the risks tied to heavily indebted energy companies in the high-yield market, and the fallout for other companies if broader credit markets tighten. U.S. government bonds, which have already rallied to unprecedented highs, extended gains. The yield on the 10-year Treasury, which moves inversely to bond prices, dropped to 0.431%. The 30-year yield fell below 1%, reaching 0.866%. Read more here.
Automakers Get 'Imaginative' with Coronavirus Part Disruptions
The real impact of the coronavirus outbreak in China on the North American auto industry soon could be felt as delays from the shipment of parts catch up to automakers — a disruption that could lead suppliers to reverse a trend of consolidating production in China. The Detroit News reports that as automakers cancel vehicle showings and implement employee travel restrictions, the magnitude of the outbreak's impact on U.S. manufacturers ultimately will depend on demand, according to experts. Companies may have to pay extra to prioritize shipping or for air freight travel as the extended holiday and slow production ramp-up catches up to manufacturers. But if the virus worsens here, it could hurt demand. While that may reduce the need for expedited shipments, it could cause a host of other problems. "The larger danger, in my opinion, is a demand-side collapse," Michael Dunne, CEO of Hong Kong-based advisory firm ZoZo Go LLC, said Friday during a webinar held by the Center for Automotive Research in Ann Arbor. "People’s appetite for going out, buying things, doing things can go to nothing in a hurry. ... It's a time for extended uncertainty over the next several months and to get used it to as soon as we can.” Read more here.
Cox Survey: Dealers Are Upbeat on Spring Sales
As they reached mid-winter, U.S. dealers answering a quarterly Cox Automotive survey looked forward to a robust spring selling season and were taking on additional employees and investing in technology to further drive sales. But, reports Automotive News, if the survey had been administered just weeks later, as coronavirus concerns spooked Wall Street and threatened consumer confidence, overall scores in the latest Cox Automotive Dealer Sentiment Index survey likely would have tumbled, Cox Chief Economist Jonathan Smoke said. The survey measures dealer optimism on a quarterly basis. Franchised dealers participating in the first- quarter 2020 survey, conducted Jan. 27 through Feb. 10, were buoyed by the strong start to the year, making them "the most optimistic we have seen since the beginning of 2018," Smoke said. Used-vehicle sales remained a bright spot, though economic and political uncertainty weighed on dealers' minds. The survey overlapped with the conclusion of President Donald Trump's impeachment trial. If the survey would have been taken "fresh off the carnage of the stock market declines," dealer sentiment scores would be "directionally lower, if not statistically significantly lower," Smoke told Automotive News last week. Read more here.
How the 'Boring' Toyota Camry Became the Bestselling Passenger Car in America
The Toyota Camry has a reputation, even within Toyota itself, for being a humdrum car. But gosh does it ever sell. The Camry was the top-selling passenger car in the United States in 2019, and is one of the bestselling vehicles of all time, reports CNBC. It remains one of Toyota’s most successful vehicles of any shape, despite the fact that it is trying to compete in a market that is tilting in favor of sport utility vehicles and crossovers. Unlike U.S. automakers, which have cut production of their own sedans and coupes, Toyota is not pulling out of traditional passenger cars anytime soon. The company sees the abandonment of these segments by others as an opportunity to grab market share, which it has. In the standard midsize sedan segment, Toyota told CNBC it gained 5 percentage points of market share between 2015 and 2019, rising from 15% to 20%. Read more here.
Luxury Brands Cutting Dealers Some Slack
Amid signs of a softer market and restless consumer trends in vehicle shopping, some luxury brands are now rethinking big-budget and often contentious facility upgrades, reports Automotive News. The automakers want to see just where economic and retail trends are going before pressing their dealers to commit to more investment in ever bigger and flashier brick-and-mortar facilities. "It's not all about square footage and building the biggest facility in the world for no reason," said David Smith, CEO of Sonic Automotive, the nation's fifth-largest new-vehicle retailer, which owns premium-brand stores in multiple states. Instead, a new attitude is rising that asks, "What's going to make financial sense?" he said. "It seems like we've gotten a lot more cooperation with our manufacturer partners with that." With new-car sales flattening, retailer profitability slumping and the prospect of a pricey shift to selling electric vehicles, some dealers are pushing back against the factory's demands for seven-figure facility overhauls. But unlike in other times, when automakers used carrots and sticks to press showroom renovations forward, manufacturers at the moment appear to be listening to dealers. Read more here.
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