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Record U.S. Auto Sales Expected To Stall, But Not For Long

Record U.S. Auto Sales Expected To Stall, But Not For Long.

LMC Automotive, S&P, Alix Partners Publish Forecasts.

    Forecasters were scrambling to point out that the long march to ever-higher U.S. auto sales was coming to a temporary end, but the next few years will still provide a healthy market place.

    U.S. auto sales have increased steadily since the 2009 recession, but LMC Automotive and Standard & Poors called a temporary halt, before predicting that long term growth will return. Alix Partners expects a new record this year, but a sharper fall and a less healthy rebound later.

    LMC Automotive cut an average 250,000 each year from its vehicle forecast of 2016 to 2023, with a larger reduction this year and next. For 2016, the forecast was cut by 300,000 or 1.7 per cent to 17.4 million. Last year’s sales were a record 17.44 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 levelling off, but it does not necessarily signal that further contractions or an automotive recession is imminent,” said LMC Automotive’s Jeff Schuster.

    LMC Automotive’s forecast predicts sales holding around mid-17 million before slowing climbing past 18 million by 2022.

    “Underpinning our automotive outlook is the expectation that the U.S. economy will continue to expand, averaging at least two per cent GDP growth through the forecast period, something which is certainly achievable,” LMC Automotive said.

    S&P cut its U.S. sales forecast for this year to 17.5 million from 17.8 million, citing slowing demand. S&P also cut its forecast for U.S. economic growth this year to two per cent from 2.3 per cent.

    More pessimistic
    Alix Partners is more pessimistic over the medium term. It cut its forecast for next year to 17.5 million, still expects 17.8 million in 2016, but a sharper fall to 15.2 million in 2019, followed by a gradual upturn to 16.8 million in 2022.      

    Irwin Stelzer, Sunday Times “American Account” columnist, weighed in too.

    “Car buying, which last month rose but at the slowest pace in over a year, won’t collapse. Buyers are heavily dependent on generous financing terms to keep monthly payments affordable, especially as average prices of sensor and gadget-laden cars and light trucks continue to rise,” Stelzer said.

    Evercore ISI reckoned the U.S. market would at least provide steady growth.

    “We now see 2016 growth of just one per cent. We do not see the U.S. cycle as over. Indeed, if history serves any lessons it is that auto cycle highs tend to be multi-year events. Going forward, volume growth beyond last year’s record 17.5 million light vehicle sales will likely be made up of small/anaemic increments and at this stage we are not expecting any acceleration compared with the 1.5 per cent growth witnessed year to date,” Evercore ISI said.  

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