Despite surprisingly strong 2018 results and 2019 estimates out of General Motors last week, it’s becoming clearer that a recession in the U.S. auto industry is already underway. All one has to do is look around: factories are closing, shifts are being truncated and thousands of layoffs have taken place.
Meanwhile, Detroit is showing increasingly more signs that it is in the midst of a recession as demand for sedans has collapsed. This collapse has been the result of most consumers moving to sport utility vehicles and pick-ups. In fact, the models that used to be the lifeblood of the car industry, sedans like the Honda Accord and Ford Fusion, only made up 30% of US sales in 2018.
Sedans are estimated to sink to 21.5% of the US market by the year 2025, according to research from LMC Automotive. That will leave car manufactures with extra factory capacity that will be capable of producing some 3 million more vehicles than buyers want. This type of overcapacity has resulted in losses and has catalyzed past recessions for the industry.
Jeff Schuster, senior vice president of forecasting at LMC Automotive, simply told Bloomberg: “You could classify this as a car recession.”