Global Auto Industry Profits Have Peaked, Bernstein Analyst Warns

In a new report, AB Bernstein analyst Max Warburton discusses the firm’s bearish thesis for the global automobile industry in coming years. Warburton believes that the booming auto sales numbers in 2015 represent the peak of the current cycle.

Global auto sales reached a record-high 87 million units last year, up 35 percent from 2009 levels.

Warburton pegs China as the driving force behind the boom and believes that 20 percent OEM margins in China will soon be long forgotten. He praises the U.S. government’s handling of the Financial Crisis and credits it for laying the foundation of the current auto boom by allowing for an industry “reset.”

Related Link: We Currently Face A 20% Chance Of Recession

“We are at the end of an era of super-normal Chinese pricing, global capacity shortages, cheap money, and at the end of an era that has seen conventional vehicle technology still prevail,” Warburton explains.

The firm believes that the peak of the auto cycle could endure throughout 2016 but that meaningful decline will begin by 2017. Shares of Ford Motor Company F, General Motors Company GM, Honda Motor Co Ltd (ADR) HMC and Fiat Chrysler Automobiles NV FCAU are all down 10-20 percent in the past year.

Disclosure: the author holds no position in the stocks mentioned.