00:00 Speaker A
And on the demand front, sales are strong, production’s up, GM is getting higher prices with fewer discounts. So what does that say about the pricing power of GM relative to the strength of the auto market overall?
00:23 Speaker B
Yeah, yeah, first of all, on the strength of the overall auto market, I think one thing the market has completely missed is the impact of the millennials onto the auto cycle. I’ve been following the autos over 40 years and right now the underlying demand trends based on demographic and the age of the vehicle fleet and replacement are better than at any other time in the 40 years that I’ve followed the group. Auto sales are moving higher, much higher over the next three to five years. And if you look at the millennials, that generation has a bigger, will have a bigger impact on overall economy than the baby boomers did in the 1980s. And it’s bigger and it stretches out over a longer period of time. The millennials are now in the prime age for home ownership and vehicle ownership. Those two kind of go hand in hand. So I’m very bullish about underlying demand trends in the US market. You put on top of that, the the the discipline the industry has with inventory, that gives and what GM and Ford in particular have done rebalancing their portfolio. GM and Ford really don’t make cars anymore. It’s limited what they produce. The Corvette, Cadillac in the case of General Motors. And and so you you’re getting a much higher shift in mix for General Motors and Ford into segments where they can compete, which is much more profitable. And so the industry is probably in the best potential shape for an upturn, uh, that I’ve seen it in in the last four decades.
01:45 Speaker A
Hmm, so is is that may does that maybe give you a little bit more confidence that just the sheer demand might be able to offset some of these tariff pressures?
01:54 Speaker B
Absolutely. No question. Demand and the consumer preference. You know, if you look at the government data, uh the average consumer expenditure for a light truck is $15,000 higher than it is for a car. And so as you’ve shifted in the market from going 50/50 cars to light trucks to now 80/20 light trucks to cars, um, that has benefited the Detroit 3, it has benefited the mix in the overall market, and it it’s it’s one of the things that accounts for the higher ATPs that you’ve seen in the marketplace.
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