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2 Auto Picks Among Modest Expectations

We expect modest auto market growth this year, with GM and Adient as standouts.

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Dave Whiston: Our global automotive team expects 2020 global light vehicle sales to be in a range of a 1% decline to a 2% rise over 2019. Our forecast may be revised downward if the coronavirus situation meaningfully hurts demand for a large portion of the year. We expect growth in China, Brazil, and Russia, low single-digit declines in the U.S. and EU, and a mid-single-digit decline for Japan as that country pays the price for raising its consumption tax last October to 10% from 8%.

For the U.S., we forecast about a 3% drop in 2020 light vehicle sales to a range between 16.5 and 16.7 million units. This year started off with sales down only 0.2% year over year in January. Car models remain out of favor, falling 10.3% in 2019, while light truck models, which are crossovers, SUVs, vans, and pickup trucks, grew 2.8% last year. For the full year 2019, light trucks increased their sales mix by 290 basis points to 72%, with the Detroit Three’s mix higher in the mid-80s to low 90s. We see continued penetration at the expense of car models because there's still many people out there driving a car nearly 12 years old on average, and we think those owners will want a light truck when they eventually have to buy another vehicle. Another reason we expect more light truck penetration is the Detroit Three have nearly exited cars altogether, with a few exceptions, such as the Chevy Malibu midsize sedan. We believe fewer car options should lead to more light truck growth over time and a buyer doesn't have to sacrifice a lot of fuel economy anymore to buy a bigger vehicle.

David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.