Recession Leading to Significant Auto Industry Slowdown in 2012

Economic cycles do not affect consumer staples as much as they do industry of consumer discretionary. At the time of economic slowdown like the one going on right now, consumers tend to lose confidence in the economic condition and only the most important things are kept under consideration and as a result savings go on increasing. As a result of this situation it is the consumer discretionary that normally drops first.

Consumer discretionary can be defined as expending a consumer’s discretionary income on products that do not normally fall under the category of necessity; for instance eating at restaurants, spending on vacations, buying new vehicles etc.

At the time of economic slowdown, the companies that sell discretionary products normally see their shares going down and get undervalued. This also is the time where investors grab the opportunity and invest in discretionary stocks and sell them off when the economy bounces back.

The automotive industry, rather peculiarly, has been beaten down during economic events and has looked very sensitive in last one year. In the first half of the current year GM led the share market in US with 18.1% market share, followed by Ford at 15.7% market share. Next in line came the Japanese auto maker,Toyotawith 14.4% market share and then was Chrysler Group with 11.5% share. At the bottom of the top 10 list were Honda and Nissan Motor Co. with 9.6% and 7.9% share respectively.

There was a massive structural change that we saw during the economic slowdown back in 2008 and it is because of those changes the future of global auto industry is expected to be dominated by six major auto markets beingChina,India,Japan,Korea, Western Europe andU.S.

Three of the leading automakers fromU.S., GM, Chrysler and Ford are said to have bounced back in automotive market, thanks to a strong demand of their vehicles in many foreign markets. The main reason behind their success story is their promptness as they timely reacted to changing demands in major auto markets and revived both their foreign and domestic portfolios.

Inspite of some positive outcomes in last few months, experts feel that auto industry would face more slowdown in coming months. This can in particular hold true if the auto markets in foreign lands remain under continuous pressure or ifU.S.faces double dip.

In occurrence of either of the cases, the investors around the globe might opt to go for basket approach and play at lower risks.

DISCLAIMER: This content is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. - Contact us at support @ avauncer dot com if you have any questions or comments.