The auto industry may be in for tough times ahead for many reasons.

1. The high rate environment we’re in has made it too costly for people to take out a car loan or any loan. It’s illogical to take out a loan with 8% interest payments. For this reason less people are buying cars.

2. Oil supply is tight, this is affecting both car producers and car owners. With higher oil costs car production costs are up. Due to the lack of demand for cars car producers aren’t in position to raise prices. This means a smaller profit margin for car producers.

3. Fuel prices are up with less supply to go around. This means less demand for gas vehicles as consumers look to alternatives. Owning a gas vehicle is becoming a luxury many people can’t afford.

4. The United Auto Workers Union strike is putting pressure on car producers to raise wages. Unfortunately car producers are already facing higher costs and less demand. It’s tough to create more money for their employees when they don’t have money coming in from customers. While the workers are dissatisfied with the car producers, I don’t think they’re to blame. Irresponsible monetary policy has led us to a place where many of these industrial workers can’t afford the things they need to live a comfortable lifestyle. This high rate environment is killing demand. A lower rate environment would increase demand. but it will have other consequences. The options aren’t great for the Fed.

Keeping my eye on the auto industry moving forward.

#autos #oil #stress