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U.S. Car Sales Set To Slip Again, But Market Remains Healthy

U.S. Car Sales Set To Slip Again, But Market Remains Healthy

“GM and Ford will adjust production to slowing demand – as opposed to boosting sales through incentives – to avoid creating excess supply”

Most forecasters reckon U.S. car sales will fall again in 2018, but not by enough to change the perception that the market remains healthy.

BMI Research calls for a 2.4 per cent fall in 2018 to 16.8 million cars and light trucks, which would still be fourth-highest volume on record.

“Sales volumes will still be up near previous records even though not surpassing them, and this is a sign that the market is generally still healthy,” BMI Research said in a report.

Standard & Poors said first quarter sales in the U.S. were stronger than its forecasts for the year suggested, partly driven by higher incentives, but will still be a bit lower for the year, and next year too.

March U.S. sales rose 6.4 per cent to 1.66 million and in the first quarter by 2.0 per cent to 4.12 million compared with the same period last year.

“S&P Global Ratings believes that U.S. auto sales will weaken slightly in 2018 and 2019 from 2017 but maintain a relatively healthy annual rate of 16.7 million-16.9 million units. This is based on our expectation for steady U.S. GDP growth, housing starts, gasoline prices, and to a less extent some demand support due to U.S. tax reform and the fairly higher average age of light vehicles on the road, which is now over 11.5 years,” S&P said.

Cars down, pickup trucks up
BMI Research said it had revised downwards an earlier forecast of only a 1.5 per cent decline. That was because the passenger car component of the market is forecast to fall 10 per cent, up from a previous expected 5 per cent decline. This was offset to a degree by expected higher light truck sales now forecast to grow 2.0 per cent in the year, up from the previously expected 0.5 per cent gain. According to BMI Research, the passenger car share of the market at the end of 2018 will be down to 33 per cent compared with 47 per cent “prior to the financial crisis.”

S&P said despite the relatively healthy state of the market the danger that carmakers will distort sales with incentives is unlikely.

“We believe that automakers such as General Motors Co and Ford Motor Co will choose to adjust production to slowing demand – as opposed to boosting sales through incentives – to avoid creating excess supply,” S&P said.

IHS Markit said its 2018 forecast remains at 16.9 million.


 

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