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We Hit Peak Horse...Will We Hit Peak Car?

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We Hit Peak Horse...Will We Hit Peak Car?
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In a note issued Tuesday, Barclays discussed the future of the automotive industry and the impact of technology on automakers such as Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM).

Analysts led by Brian A. Johnson thought that just as demand for horses once peaked, so too could demand for cars.

Johnson wrote that "the impact of shared autonomous driving on annual car sales and the national fleet of vehicles will be significant – we see annual light vehicle sales decreasing by over 40 percent and the car parc [capacity in a region] decreasing by 60 percent."

Justification

The analysts acknowledged that such as view might seem extreme; however, they noted that "the U.S. horse population hit its peak in 1920 and by 1930 cars per capita surpassed equines per capita." The remaining horse population of 4 million is now approximately 85 percent smaller than its peak population of 25 million.

Related Link: Ford CFO: Stay Tuned! The Second Half Is Going To Be Very, Very Strong

"While we see vehicles for work, status, and performance remaining intact, we expect a significant impact on vehicles used just for transportation – which we think will be mostly displaced by shared autonomous driving," according to Johnson.

The analysts compared how automobiles today are similar to horses that performed various jobs. Horses served as a “means of transportation from point A to point B; for others, a means to do work (e.g., pull a plow); and for some, a sign of status or performance (e.g., thoroughbreds, dressage horses)."

Outlook

Based on Johnson's analysis, SAAR could decline from 16.5 million currently to 9.5 million. Vehicle sharing could reduce SAAR by 12 million units; however, the analysts thought increased vehicle usage would provide an offset of 5 million units "given a more aggressive scrappage rate."

Based on the firm's research, the analysts presented a table with the expected impact listed by company.

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Ford Motor Company recently traded at $15.28, down 0.22 percent while General Motors Company traded at $34.76, down 0.39 percent.

Image Credit: Public Domain

Latest Ratings for F

DateFirmActionFromTo
Dec 2016MacquarieInitiates Coverage OnNeutral
Nov 2016BerenbergInitiates Coverage OnSell
Oct 2016Daiwa CapitalUpgradesUnderperformNeutral

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Posted-In: Barclays Brian A. Johnson SAARAnalyst Color Analyst Ratings Best of Benzinga

 

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