Auto industry’s 2017 sales decline a glimpse of the future?

The year 2017 ended on a down note after several strong new-car sales months that rescued the auto industry from a disappointing year.

December sales were lower year-over-year, although all but one automaker beat Kelley Blue Book’s monthly estimate and the industry scored its biggest sales month of the year. At just over 1.6 million, December sales fell well short of the results needed to equal last year.

Still, 2017 was the fourth-best year ever, according to CoxAutomotive, boosted by the strength of September and November results that beat 2016 after eight months in a row of lower sales. In the end, sales fell more than 300,000 units shy of the 2016 record of 17.55 million.

Ford F-Series lead a winner with higher sales in December.

Ford F-Series a winner with higher sales in December.

The month’s sales also ensured 2017 would be the first down year since the Great Recession in 2009, and, unfortunately, some analysts suggest it’s the start of a longer slide.

“Most major automakers … look ahead to weaker sales in 2018 that will test pricing discipline in an industry where consumer discounts are already at elevated levels,” according to a Reuters report.

The National Automobile Dealers Association has predicted sales of 16.7 million this year, while AutoTrader.com and Kelley Blue Book anticipate sales of 16.6 million. Either way, that would represent a slide of about 800,000 vehicles from the 2016 high-water mark and around a half-million from 2017.

“The market is pretty saturated right now,” Edmunds.com’s Jessica Caldwell told The New York Times.

Major factors affecting new-vehicle vehicle sales in 2018 are expected to be a mixed bag. On the plus side of the ledger are:

Tax reform – “Many consumers will see their take-home pay rise” – GM chief economist

Buying incentives – Automakers will offer generous incentives to boost sales – J.D. Power

Consumer confidence – “Consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018” – The Conference Board

Economic growth – The broad economy will continue to grow – GM chief economist

Unemployment rate – “Essentially near full employment” – Cox Automotive

One of the biggest worries is that pent-up consumer demand for new vehicles is winding down, according to BMI Research, after its eight-year winning streak, due at least in part to improved quality that is causing many Americans to keep their cars longer.

“People who wanted to buy new cars have already bought them,” Eddie Alterman, editor-in-chief of Car and Driver magazine recently told ABC News.

Other possible negative factors include:

Vehicle prices – “Average transaction prices closed the year … [at] a record high” – Kelley Blue Book

Interest rates – Income gains from tax reform will be offset by rising rates – GM chief economist

Gasoline prices – Prices in 2018 will be the highest since 2014, although they won’t come anywhere close to near-record prices – GasBuddy

Suggesting that 2018 would bring “robust” sales, Mark Scarpelli, National Automobile Dealers Association chairman, said: “Every dealer in America, myself included would be thrilled with a seasonally adjusted annualized rate of above 16 million. Because it means that, one, the market is stable, and two, that demand is still healthy … particularly for light trucks, SUVs and Crossovers.”

And now we just have 12 months to see what really happens.

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