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Auto and Auto Supplier stocks have risen sharply over the past 30 days – Driven by evidence of liquidity from both the Fed and Private Capital Markets, signs of bottoming for Auto Demand, and indications that Auto Production is poised to resume. For the near term, we believe that newsflow could remain broadly supportive. The mechanics of SAAR calcs could lead to (perhaps misleadingly) strong SAARs in the months ahead. And we believe that tightening of new and used car inventory could support some improvement in pricing.
The breadth and slope of the decline in global economic activity post COVID-19 is unprecedented. For Autos, while there is still relatively little visibility into the intermediate term outlook, there is a growing view within the Industry that the pattern of declines globally will mirror that which was experienced in China. We’ve been seeing this in Europe. And our contacts suggest that a similar pattern is emerging in the U.S. We are lowering our Global Auto Production forecast for 2020 to -20%. Embedded within this is a U.S. Light Vehicle Sales assumption of 12 million (down from 17 million in 2019), in-line with the 10-12 million unit “guestimate” that we’ve heard from Industry contacts.
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