The global automobile collapse that we have been covering in-depth over the past year is continuing apace, with the shockwave most recently hitting the United Kingdom. Sales of new cars in the UK fell at the steepest rate since the financial crisis, according to the Society of Motor Manufacturers and Traders. The numbers were lower due to consumer uncertainty regarding Brexit and the falling popularity of diesel vehicles.

Registrations in the United Kingdom were down 6.8% to 2.37 million vehicles in 2018, according to the SMMT. Diesel vehicle sales were down a massive 30% and gasoline powered models were up 8.7%, showcasing a shifting trend. Offsetting this plunge, electric cars and hybrids were up double digits, posting 21% gains for the year.

But overall registrations dropped in the mid single digits and the SMMT predicts a further 2.4% reduction in new car sales in the United Kingdom this year. The fall for 2018 was at the high-end of estimates provided by the SMMT and it’s the second year in a row of sales falling. Registrations were down 5.7% in 2017.

The CEO of SMMT, Mike Hawes, stated: "The industry is facing ever-tougher environmental targets against a backdrop of political and economic uncertainty that is weakening demand so these figures should act as a wake-up call for policy makers.”

As a reminder, heading into 2019, we recently reported that Morgan Stanley predicted the first global auto sales volume drop in nearly a decade. The bank's auto analyst Adam Jonas predicted that global auto sales would be down 0.3% year over year in 2019 and that many consensus estimates across the industry are far too optimistic.

In a note released last week, Jonas predicted "lower guidance" coming out of Detroit automakers at the same time that the global auto market sees its first volume drop since 2009. And despite consensus forecasts predicting revenue and margin growth across the board, Morgan Stanley generally defied the trend, reiterating its cautious view on the US auto sector.

Jonas expects global volume in 2019 to fall to 82.1 million units versus 82.4 million units in 2018. His team also expects higher input costs, combined with rising rates and rising R&D expense, to further pressure 2019 numbers. Aside from the obvious (lack of volume growth), he predicts tariff related costs will still be an overhang for automakers heading into the new year.

Here is a full chart showing Morgan Stanley's predictions versus consensus estimates:

Morgan Stanley also believes that industry consensus for 2019 earnings is too bullish. Currently, the consensus is for all companies to grow revenues by 1% and EBITDA by more than 3%, which implies a 24 basis points EBITDA margin expansion. Instead, Morgan Stanley expects flat revenues and EBITDA down 1%, which would signify a 13 basis point contraction of EBITDA margins.