'Peak car' is a potential 'red flag' (GM, F)

Flickr, CC / Hugo90

• A shift to used-vehicle sales in the US, the latest data point suggesting 'peak car' may have already happened in the United States.
• Shareholder returns for GM and Ford have been weak as a slew of companies continue to build around the legacy automakers.
• Watch GM and Ford trade live.

Debt-strapped millennials. Ride-sharing apps. Self-driving technology. The list continues to grow as evidence of "peak car" mounts.

Now it's time to add a shift to used car sales to the list, according to a recent report from CFRA Research. Rising prices for new vehicles over the past few years have accelerated the change in consumer behavior.

The trend is particularly pronounced among the highest-quality borrowers, whose take-up rates for used-car financing rose from a year ago, according to the report. The percentage e of "prime" credit consumers financing used cars hit a record high of 62% in the first quarter of 201[ads1]9.

"In our view, the fact that the most qualified consumers are increasingly gravitating toward used vehicles is a potential red flag for automakers who continue to push the limits of consumer affordability, "Garett Nelson wrote the author of the report.

Fears that the US auto market has already seen" peak car "sales have been a growing source of worry for the industry. New car sales at General Motors fell for the third year in a row in 2018 – to 2.95 million vehicles, a drop of nearly 50,000 from 2017. Ford sales have also declined over the past three years, coming in at 2.48 million in 2018, down 9,000 from the previous year.

And that's not all. Sales of ultra-luxury cars have been hit particularly hard by demand for Aston Martin, Lamborghini, and Rolls Royce vehicles have sharply fallen, according to the USA Today, citing the data analytics firm Thinknum.

"In our view, the peak in car sales is clear, "said Bank of America's Michelle Meyer and Anna Zhou in a client meeting. Other analyst support that view

"US light vehicle sales are currently on track to come in just below 17 million units in 2019, which would mark the first time since 2014 that new vehicle sales have come in below 17 million," concluded the MarketScope report.

The rise of electric vehicles presents a threat to legacy of tomakers, forcing them to invest huge amounts of capital just to keep pace. Millennials also have major purchases, such as homes and cars, due to growth from student debt.

In addition, the rise of ride-hailing giants, Uber and Lyft, have caused consumers to question their need for personally-owned vehicles. And advances in self-driving technology, which some analysts say are only years away, may further accelerate these trends.

Concerns about the rapidly evolving industry have dented the returns of the leading US automakers. GM shares are flat compared to five years ago while Ford is down 40%. In addition, over 38,000 jobs have been shed in the US through 2019 alone.

"The industry is right now staring down the barrel of what we think is going to be a significant downturn," Bank of America's John Murphy customs a conference last week .