What's going on?
Continental – the German automotive manufacturing company that makes parts for Porsche and Toyota, among others – cut its own forecasts on Wednesday for the second time this year. Its stock plummeted 13%, the most in one day since 2009. Autsch.
What does this mean?
Despite its name, Continental sells tires, brake systems, and chassis components worldwide – but not enough, it seems. After disappointing sales in China and Europe, the company has lowered expectations again for its sales and profit this year – citing higher costs for developing electric cars, lower demand for tires, and ongoing warranty claims.
But it’s not just Continental feeling the pinch: rival auto supplier Valeo also cut profit expectations for the year, along with carmakers Daimler and Volkswagen.
Why should I care?
The bigger picture: China has one big footprint.
Customers in China put the brakes on purchasing new vehicles ahead of a change in import taxes (a.k.a. tariffs). Originally 25%, the tariffs were slashed to 15% as of July – a saving that Chinese consumers were holding out for. However, car sales in China still slumped in July as the trade war waged on and economy throttled down.
For you, personally: Earth over cash.
The auto industry is struggling to adapt vehicles to meet the new European emissions test requirements, which will come into effect in September, spotlighting pollutant and CO2 emissions as well as fuel consumption. The new standards have already caused a slowdown in sales for carmakers (i.e. Continental’s customers – fewer sales for them likely means less revenue for Continental, too). Volkswagen has even rented parking lots to store some of its 250,000 vehicles that may be held up in testing (tweet this). As global emissions have been steadily climbing over the last 60 years, it’s probably good for you (and your offspring) if the transportation industry manages to reduce some of the c.14% that it contributes to emissions worldwide.