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In the automobile market, it's not just the subprime loans but falling used-car values that have one widely followed analyst worried.
"A stretched auto consumer, falling used prices, and technological obsolescence of current cars are ingredients for an unprecedented buyer's strike," Morgan Stanley Equity Analyst Adam Jonas said in a note Thursday.
As a result, he is cutting 1 to 4 million units from his U.S. auto-sales forecast for each year through 2020.
U.S. auto sales have steadily climbed since the end of the Great Recession to hit a record in 2016 of 17.55 million on a seasonally adjusted annualized rate, or SAAR. The pace has slowed this year, and a report last week showed SAAR auto sales in May held steady from the prior month at 16.8 million to 16.9 million vehicles.
Morgan Stanley's US SAAR auto sales forecasts: Before and after
Source: Autodata, Morgan Stanley Research
U.S. consumers depend heavily on used-car values in order to buy new ones. Jonas pointed out that about 9 out of 10 new car purchases in the U.S. involve a trade-in or off-lease vehicle.
"We see scope for an unprecedented level of pressure on the used car market that could significantly exceed what was experienced in the 2008 market shock" when used-car values fell about 15 percent over 9 months, he said in the report.
Over the next four to five years, Jonas expects used-car prices to fall between 25 and 50 percent.
As a result, Jonas cut his auto sales forecast this year to 17.3 million, down from 18.3 million. He also lowered his estimates for 2019 and 2020 down to 15 million each.
Jonas noted a 15 million annual pace of sales is equal to that of 2013 and maintaining that level may need government support with a car purchase incentive program.
Other negative signs for auto sales the report listed include:
1. New vehicle inventory levels rising — Total U.S. inventory at the end of May neared 4.1 million units, up 9 percent year-on-year and the highest May Jonas has seen on record.
Total car & light truck inventory units (millions)
Source: Autodata, Morgan Stanley Research
2. Record high deep-subprime participation — In 2016, 32 percent of subprime auto asset-backed security deals had a weighted average FICO score less than 550. That's up from 5 percent in 2010, the report said.
Deep subprime (weighted average FICO < 550) share of annual subprime auto asset-backed security deals
Source: Rating agency reports, Bloomberg, Morgan Stanley Research
3. Rapid changes in technology — Expectations of a rapid ramp-up in automated driving technology such as Automatic Emergency Braking should change "the desirability, insurability and useful life of the $2 trillion worth of used cars in the U.S."
— CNBC's Michael Bloom contributed to this report.