The global car sales have grown steadily since 2010, with an average annual growth of over 5%. According to forecasting company LMC Automotive, the global car sales is expected to reach 97 million vehicles this year, but growth is expected to slow to 1.8% from 2017.
China’s booming auto market is cooling, partially because of the escalating trade tensions with the U.S. The demand for cars and trucks in the United States has long been a highlight of the global car industry. It has reached its peak after seven years of continuous growth and has helped many automakers and auto parts suppliers around the world to generate revenue.
In Europe, new car sales have benefited from the economic recovery of the continent Europe, and the auto market is weakening as demand returns to recession. This makes it difficult for many auto companies to make money.
Continental AG, the world’s second-largest auto parts supplier, also warned investors that profits could be hit this year due to weak auto demand in Europe and China.
To be sure, global car demand is still strong, driven by continued economic strength, but the headwinds are accumulating.
Many automakers will face a weakening outlook as new tariffs imposed by the Trump administration this year cause steel and aluminum prices to rise. A comprehensive trade war may put the auto industry in a difficult position. This concern has put several automakers, including Ford and Fiat Chrysler, into a cautious model as they adjust their financial expectations. In June, Daimler issued an unexpected profit warning, saying that China’ s retaliatory tariff on US-made cars would weaken the sales and profits of its sport utility vehicles (SUV) produced at an Alabama plant.
President Trump’s trade policy is weakening consumer confidence in many markets outside the United States and is widely seen as the biggest threat to sustained economic growth.
Intensified emissions regulations in Europe and China have also forced automakers to spend billions of dollars on new technologies to suppress tailpipe pollution.
But there is still time to save the auto market from a full-scale recession. Trump announced on Monday August 27 that it has reached a new trade agreement with Mexico, which may be a signal that the U.S. government is beginning to resolve trade disputes and lower trade barriers. However, if tariffs in China and Europe escalate as Trump has promised, it could lead to a market crash.