One impact of low oil: The sedan recession

The downturn in crude has a new casualty: the small and mid-size car.

March U.S. vehicle sales disappointed, falling to about 16.6 million autos versus estimates of 17.4 million. While unit sales for pickup trucks, SUVs and crossover utility vehicles (CUV) were all positive, small, luxury and mid-size car revenues slumped.

“The small and mid-size sedan car market is in trouble. Looking at last month’s numbers, we have a recession in cars,” Brian Johnson, Barclays Capital senior autos analyst, told CNBC “Squawk Box” on Thursday.

“This low oil price … is really what’s driving customers out of cars, into CUVs, into light trucks,” he said.

Crude prices have spiraled down more than 60 percent to about $37 per barrel since mid-2014.

Fiat Chrysler‘s announcement Wednesday that it will lay off 1,300 workers and ax one shift at a plant that makes the midsize Chrysler 200 is a symptom of the car recession, Johnson said.

In a note, Johnson said automakers may have to cut production in the second half if sales do not turn around. Last year, manufacturers sold 17.5 million light vehicles in the United States..

A flood of leased vehicles due to hit the market stands to put further pressure on showroom prices and heighten risks for automakers, Johnson told CNBC.

“As those used cars come back, we think the value of used cars is going to go down. When the value of used cars go down, lease deals become more expensive, so the OEMs step in and subsidize it,” he said.

Even if vehicles sales rebound above 17 million, automakers will likely have to offer increased incentives and lease support this year, Johnson said.

The current vehicle mix benefits Ford and General Motors, and consumers’ taste for trucks and SUVs should offset the higher cost of incentives, he said in a note.

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