US Automakers Struggle With Skeptical investors

Last year economic improvement coupled with low oil prices created the perfect climate for the auto market. US consumers had more money to spend as unemployment rates fell and savings at the pump increased disposable income. Ultra-low gas prices helped propel the sales of larger vehicles like SUV's and trucks, benefitting many American automakers who struggled with cost-conscious consumers after the financial crisis. However, despite the fact that 2015 saw a record number of car sales, shares of General Motors GM and Ford Motor Co. F have fallen 12.3 percent and 5.79 percent respectively over the past month. What's Going On? Investors have been reluctant to invest in automakers this year as they worry that 2015 may have been as good as it's going to get for automakers. While markets as a whole have fallen lower on concerns about China, stocks from the auto industry have fallen further than the Dow Jones Industrial Average as investors see the sector as particularly vulnerable. China One of the main concerns has been China. The Chinese economy has been struggling for the past year, but many have begun to question whether or not Beijing will be able to turn things around any time soon. As China represents the largest car market in the world, many investors are expecting that another year of economic turmoil could hit automakers hard. The Fed Another big problem for the auto industry could the Federal Reserve's decision to begin raising interest rates. Although the bank only raised rates by a quarter of a percentage point in December, most are expecting the bank to continue steadily increasing the interest rate as the year progresses. This is likely to make auto-financing loans more expensive, thus reducing the number of people that will be able to buy new cars. Ballooning inventories of unsold cars would be bad for the industry as a whole as it could create a price-war between car makers and cut down on profit margins.