SEVEN-YEAR WINNING STREAK IN JEOPARDY
Forecasts now say purchases of new vehicles in 2016 won’t be as hot as once predicted, but not everybody is convinced
Two new forecasts have lowered estimates of new-vehicle sales this year — an important barometer for the overall economy — and one predicts sales are likely to fall below 2015’s record levels.
LMC Automotive says it believes its downward revision will mean auto sales will break their seven-year streak by not rising. The other forecast, from TrueCar, says auto sales will still increase, just not by as much as expected.
LMC and TrueCar cite roughly the same reasons for the decline. Jeff Schuster, LMC’s senior vice president of forecasting, points to the global economic impact of the United Kingdom’s vote to leave the European Union. He and Eric Lyman, vice president of industry insights for TrueCar, both cite uncertainty about the outcome of the U.S. presidential election.
LMC now predicts the auto industry will sell 17.4 million new vehicles this year. The revision cuts the forecast by 300,000, or a 1.7% reduction from the previous forecast. It’s enough to bring the total slightly below last year’s 17.44 million. (Autodata, which USA TODAY uses as its primary source for sales, says 17.47 million new vehicles were sold in 2015.)
TrueCar says it now expects 17.6 million new cars to be sold this year, down from its previous estimate of 18 million.
“Our latest forecast now reflects the reality that the growth track that the U.S. market has been on since 2009 has stalled and appears to be leveling off,” Schuster says.
He was careful to add, however, that a modest decline “does not necessarily signal that further contractions or an automotive recession is imminent.”
Edmunds.com stands by its prediction that auto sales will hit 18.1 million in 2016. “We still forecast a record-breaking year,” spokesman Aaron Lewis says. .”
Same, too, for Kelley Blue Book, which has yet to see enough evidence of a change of heart by consumers.
“There is certainly a much greater chance of missing the record this year following June’s sales, but right now the industry is still on pace to narrowly beat last year,” KBB analyst Tim Fleming says. He noted that in the two months this year that sales have dipped, they came bouncing back strong the following month.
The bulk of the decline is expected to come from fewer sales of cars to individuals, not from sales to corporate, government or rental car fleets. Individual sales are considered the most profitable because they don’t involve bulk discounts.
One thing not worrying LMC or TrueCar: Neither thinks demographic shifts will be a factor going forward as Millennials become bigger players. Nearly the same percentage of Millennials are buying now as in the past, Schuster and Lyman say. “We believe they will perform like past generations,” Lyman says.