Despite surprisingly strong 2018 results and 2019 estimates out of General Motors last week, it’s becoming clearer that a recession in the U.S. auto industry is already underway. All one has to do is look around: factories are closing, shifts are being truncated and thousands of layoffs have taken place.
Meanwhile, Detroit is showing increasingly more signs that it is in the midst of a recession as demand for sedans has collapsed. This collapse has been the result of most consumers moving to sport utility vehicles and pick-ups. In fact, the models that used to be the lifeblood of the car industry, sedans like the Honda Accord and Ford Fusion, only made up 30% of US sales in 2018.
Sedans are estimated to sink to 21.5% of the US market by the year 2025, according to research from LMC Automotive. That will leave car manufactures with extra factory capacity that will be capable of producing some 3 million more vehicles than buyers want. This type of overcapacity has resulted in losses and has catalyzed past recessions for the industry.