U.S. sales of cars and light trucks this year will fall short of 2015’s record in the first annual decline in seven years, LMC Automotive said in a revised estimate that cites “recent plateauing” of deliveries and “growing economic and political risk.”
The research firm cut its outlook to 17.4 million vehicles from 17.7 million in a report released Tuesday. The new estimate is about 40,000 fewer than last year’s record, LMC said. The firm also reduced its annual sales projections for each year through 2023.
“The conditions out there, while they’re certainly not negative and we’re still posting good numbers overall — they’re just not going to be able to compete with those comps that we saw last year,” said Jeff Schuster, LMC’s senior vice president of forecasting. “Even if you run it at a good clip — 17.5 plus for the remainder of the year — you kind of get to where we’re at forecast-wise, which just falls short of the record in 2015.”
LMC’s revision reflects increased pessimism that U.S. deliveries this year will beat the 2015 peak. The average estimate from analysts surveyed by Bloomberg is now 17.6 million for 2016, down from a 17.8 million consensus in January. The sentiment that sales may already have peaked has contributed to falling stock prices for Ford Motor Co. and General Motors Co. even as they reported record profits.
Schuster in the LMC report said that in addition to tough comparisons with 2015’s second half, the U.S. auto market will be challenged “as the global economy grapples with the impact of the Brexit result and the unknown of the upcoming U.S. election.”
S&P Global Ratings last week cut its estimate to 17.5 million vehicles from 17.8 million, citing slowing demand from individual buyers and the effect on the U.S. economy from U.K. voters’ decision last month to leave the European Union.
A decline in annual sales would be the first since 2009. U.S. deliveries this year got off to a strong start, in part because of a lack of weather-related problems like those in the beginning of 2015, Schuster said in the interview. But it’s becoming “a little more clear that the growth rates just aren’t going to be there in the second half,” he said.
Automakers have been staying disciplined as growth slows, Schuster said. Leasing levels were down a little in June despite being “robust” overall, he said. Incentives are up as a percentage of suggested retail prices, but there’s no indication of a sharp escalation, Schuster said.
The U.S. economy overall isn’t contracting and stronger GDP growth is likely in the next two years, he said. The path “to get back on a growth track in 2017, I think, is still there,” Schuster said. “And that’s what our forecast reflects.”
Source: Automotive News