- The automotive industry makes up 2.5% of GDP, but its discretionary nature is what makes it important.
- Car loan delinquencies are rising, sales are starting to get stretched from a credit perspective, and higher interest rates won’t help.
- There is no risk of a financial crisis arising from the automotive industry, but it’s very likely that the industry will lead the economy into a healthy recession.
In a recent article, I elaborated on the difference between having a static or a dynamic view of the markets and how not thinking ahead can be very dangerous. I used the total amount of car loans outstanding to point out how things have changed in the past, i.e. car sales increased due to low interest rates, and how things will change in the future, i.e. interest rates will increase and lower car sales. More →