A U.S. mold industry slowdown has resulted in lower shop utilization and sagging sentiment among shop owners who specialize in supplying the automotive industry as they look to the future. But what is the future? According to the latest figures from auto industry watchers, things are about as bright as the low beams on a ’57 Chevy.
U.S. vehicle sales have been down every month for the first six months of 2019: January down 3%; February down 3.3%; March –3.1%; April –1.6%; May –0.1%; and June saw a negative 1.9%. Wolf Richter writing in his "Wolf Street" report commented that new vehicle sales have fallen to 1999 levels, which “puts sales on track to fall below 17 million units for 2019.” Q2 sales for GM fell 1.5% and Ford’s fell 4.1% (it was interesting to note that both of those companies have stopped reporting monthly sales and are only providing quarterly results now). FCA’s Q2 sales fell 0.5%.
While sales are falling overall, there are some big winners for these companies: Wolf reports that sales for the Ford F-Series pickup trucks were up 15.1% (519,347 units); Dodge Ram pickup sales were up a whopping 45.5% (339,756 units); and Chevy’s Silverado pickups were up 5.7% (303,676 units).
Wolf noted that this “carmageddon” represents a shift from cars to pickups, SUVs, compact SUVs and vans. The only strong seller in the car segment was the Ford Fiesta, with sales up 70% for Q2 and up 50% YTD. The Ford Fiesta, at an MSRP of $14,200, doesn’t make Ford a lot of money. Wolf noted that “there is very little profit margin for Ford [in the Fiesta], and it has no incentive to market them other than [to meet] CAFÉ standards.”
With other reports out showing that, in spite of hype promoting consumer desirability for all-electric and autonomous vehicles, the reality on the showroom floor is that customers want big trucks, SUVs and vans, with some compact SUVs thrown into the mix. Yet, the big automakers from GM to Volkswagen seem to be ignoring these numbers, throwing their money into all-electric and autonomous vehicles. Whatever happened to the idea of giving customers what they really want instead of “green-shaming” them into wanting something else?
Suppliers are caught in the middle of this marketing conundrum.
Personally, I don’t believe that it’s so much the fault of China anymore when mold work slows. China has become less of a factor for many mold makers as the “Chinese price” began to rise and quality remained so-so. U.S. mold makers really pushed themselves into being more competitive over the last decade, which is why we hear fewer complaints blaming China for lack of new mold work.
For those mold manufacturers that primarily serve the automotive industry, I believe it’s the fault of the market disconnect that has automakers selling fewer cars—that few people really want—and more big vehicles that Americans have always loved to drive.
The Q2 sales figures tell the tale: Consumers aren’t going to be “green-shamed” into buying smaller, all-electric vehicles. And they certainly aren’t in favor of giving up driving the American roadways and being chauffeured robotically.
Many mold makers began to diversify their customer and market base more than a decade ago, and that’s probably the best way they can offset the downturn in the automotive market. The OESA/HRI Automotive Tooling Barometer report PlasticsToday just posted noted that while most of the shops surveyed had “a three- to five-year strategic plan,” it was not a “robust” business strategy that included a sales plan. I would add that a good marketing plan is in order, as well, something I’ve been preaching for more than 20 years!
U.S. mold makers will always find a way to keep business going, and if China is now less of a factor, there will be other challenges right here on our own shores. Waiting for the automotive industry to wake up to real consumer wants and invest in building those vehicles might be a losing strategy for mold shops, however. The time to create a new plan is now.
Image: Moreno Soppelsa/Adobe Stock