Auto sales may get boost from pent-up demand
After a six-year run of sales gains, it’s been looking like the U.S. auto industry passed its peak. Now some executives and analysts say there may be more room to run.
Jeff Schuster of LMC Automotive, one of the first analysts to project a contraction in 2016, says the industry may still have some pent-up demand as a stronger labour market and rising consumer confidence prompt buyers to make big purchases. Though auto sales increased a scant 0.6 per cent in the first eight months of 2016 and last fall’s numbers were the highest ever, another record this year or next isn’t out of reach.
“There are buyers out there that have decided for whatever reason to not come into the market that might have otherwise,” said Schuster, who in July cut his estimate for the year to 17.4 million cars and light trucks from 17.7 million. The record set last year was 17.5 million.
Automakers’ September sales reports to be released on Monday should set the tone for the rest of the year and show whether a new high can be attained. In 2017 and beyond, most see sales staying around last year’s record or slowing slightly to a still-thriving level.
The pace this month was probably 17.5 million, the average estimate of analysts surveyed by Bloomberg. Among the biggest automakers, Toyota Motor Corp. may have the biggest gain, two per cent, while Ford Motor Co., which enjoyed elevated fleet sales in the second half of 2015 and first half of this year, may report the steepest drop, a decline of eight per cent.
Some of the untapped demand may be released as Americans who had been buying less-expensive used cars switch to buying new ones in a stronger labour market. And some buyers may be enticed by technological improvements, as new entertainment options and semi-autonomous capabilities intended to make driving easier and safer.
Honda Motor Co., which eschews discounted bulk sales to rental car companies and other big buyers, sees remaining strength in the retail market, said John Mendel, the company’s top U.S. sales executive.
The average auto sold new has been with its original owner for seven years, Mendel said. At the time of purchase, the average car got 24 miles (39 kilometres) per gallon of gasoline, he said. Now the average crossover utility vehicle, or car-based SUV, gets about 25 mpg.
Light-vehicles sales through August rose to 11.7 million, but the comparisons with 2015 are getting tougher: The industry reported annualized selling rates of 18 million or higher in September, October and November — an unprecedented three-month streak.
Sales this year may have been inflated somewhat by big discounts offered to customers. Incentives reached a record of US$3,923 per vehicle this month, according to J.D. Power.