Consumers around the globe are buying fewer cars, leading to a gradual yet consisting decline in car production. After the news on Honda’s Swindon car plant being shut down and Ford planning to close the Bridgend plan in 2020, car stocks are at an all-time low. The recent Covid-19 pandemic certainly fans the issue as car manufacturers throughout the world are forced to cease production. After incurring losses in millions, it is doubtful as to how many of them can remain afloat among such challenging times. Web.com Reviews has compiled a list of reasons that are leading to the downsizing of car stocks. Let’s take a look.
- Car Emissions- Global warming has been a concerning issue for car manufacturers. It isn’t easy to maintain the ever-increasing CO2 emission standards as it dramatically increases the manufacturing costs of cars.
Many countries are even planning to charge substantial fines if a car crosses the allowed emission limits. As a result, investors are slowly backing away from car stocks due to this added risk.
- Low Demand- China has been one of the leading consumers of cars. Even before he Covid-19 outbreak, car sales in China had started to dwindle. To make matters worse, trade tension between China and other Western countries such as the US and Beijing have further jeopardized the already suffering car stocks.
In the wake of Covid-19, China has been scrutinized due to their lack of transparency, straining international relationships. Several countries are voicing contempt against the Chinese Communist Party and have decided to ‘rethink’ trade relations with China.
The already suffering car stocks due to low demand are suffering the most due to such rifts. The volumes on the Jaguar Land Rover have fallen 25% this year alone. It is also expected to dip by 60% during the first quarter of 2021.
- Electric Cars- In light of environmental concerns, investors are slowly moving towards electric cars. However, this poses a severe challenge for can manufacturers, as they’ll have to change their entire assembly, which is not possible.
The majority of car manufacturers are simply not prepared for the change. Regular car sales dwarf the number of electric cars sold on in 2019. But the technology is still being actively researched, straining the present stockholders, compelling them to move over to the other side.
- Driverless Cars- Driverless cars aren’t a pipe dream anymore. It’s true that there aren’t many such cars on the streets, but tests conclude that it’s a viable option. You might be wondering how this can affect car stocks.
Well, with driverless cars, owners might decide to rent a car. Carpooling exists today, but in a world with no drivers, co-owning a vehicle seems a much better option.
Cars remain one of the critical modes of personal communication. The fact the stocks are dwindling is not the best news for investors and stockholders, but that doesn’t mean the industry will go belly up overnight. Automobiles in a multi-billion-dollar industry that although is troubled, isn’t going anywhere. Hopefully, with the information provided by Web.com Reviews on the subject, you now have a better insight into the matter and can manage your investments more carefully.