Globally, the market has faced volatility since 2022 snd the main issues behind the volatility

include:
● Rising inflation, Rising interest rates
● The Russian/Ukraine war & A slowdown in China.

Demand is slowing down. Consumer demand is driven by discretionary income,

Inflation and interest rates.
1. Recently, household savings are low, discretionary income low, high prices from
inflation.
2. high interest rates means it is expensive to get a loan makes it harder to afford such
a big purchase like cars.
3. Westpac economists expect interest rates to cut slowly in end 2024 and once interest
rates fall, we may expect demand for automobiles to increase as economic activity
picks up as well.
4. Analysing how macroeconomic policies affects revenue.

Inflation and depreciation of Aus dollar increasing automobile prices. All vehicles are
imported because Australia can’t benefit from economies of scale with its high labour cost.
1. Global inflation increased cost of production, supply chain issues, semiconductor
shortages also increased the price of inputs.
2. Australia imports vehicles and parts from different countries, thus understanding
where the company source their part and how they manage their foreign exchange
hedge is very important.
3. Analysing risks and hedging schedules.

Production efficiency, how does a company make their profit margin from their sales and
assembly line. Car manufacturing process is complex so understanding how their operating
income is built upon is important. Some key metrics to look into would be:
● Number of units manufactured
● Total cost to manufacture - labour costs
● Utilisation rate
● Inventory Turnover rate
● Recall Rates - Defective units over a time period.
● Ratio analysis and compare industry metrics with comparable companies.

Future of automobiles will be affected by technological advancements.

1. Trends like moving from fuel to hybrid to electric cars. I would consider the capability
of the firm and availability of resources like lithium to create car batteries. What is
their strategy to innovate, would they consider M&A?
2. Innovation costs and capital investments to increase capacity or improve machinery.
3. Analyse CAPEX and investing activities.

ESG is important in this industry since vehicles are contributors of CO2. Also aligning
to net zero 2050 policies.
1. As an ESG conscious analyst, I would look into their supply chain for emissions from
suppliers and logistics.
2. Also into their R&D innovation into reducing carbon emissions from manufacturing
and for the car design itself.