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Moody's downgrades auto industry outlook from stable to negative on falling demand

Key Points
  • Moody's cut its 2019 growth forecast for worldwide light vehicle sales by more than half, saying they won't totally recover from a slowdown in the latter part of 2018.
  • The threat of U.S. import tariffs and the United Kingdom's potential exit from the European Union are also risks.
  • Global economic growth is expected to slow.
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Weakening demand for cars and trucks has pushed credit rating company Moody's to cut its outlook for the auto industry from stable to negative.

Slowing economic growth, a better-than-expected end to 2018 and a host of potential political pitfalls are all expected to dampen global auto sales in 2019, Moody's said in a research note Monday.

The company cut its 2019 growth forecast for worldwide light vehicle sales by more than half, saying they won't totally recover from a slowdown in the latter part of 2018.

Moody's expects global auto sales to grow by 0.5 percent this year, down from its previous forecast of 1.2 percent, "which had assumed a stronger finish in 2018." For 2020, Moody's forecast growth of 0.8 percent. 

Auto sales are likely to continue falling in the first half of 2019, before regaining lost ground in the last two quarters of the year, Moody's said. It's forecasting a slowdown in global economic growth as well, with stronger growth in developing markets such as China. U.S. sales are expected to drop by nearly 3 percent in 2019 and 0.6 percent in 2020, largely due to a drying up of a financing environment that had buoyed sales for so long.

Of course, the threat of U.S. import tariffs and the United Kingdom's potential exit from the European Union are also risks.

The industry is also faced with declining sales at a time when many companies are racing to invest in new transportation tech, including self-driving cars, connected cars, and advanced safety features.

Auto manufacturers also face ever more stringent emissions guidelines, which are forcing investments in hybrid and electric vehicles, and other options for passengers and freight.