U.S. Car Sales Will Slide In 2018.
“growing second-hand inventories and a winding down of pent-up demand, will keep growth negative for at least the next two years”
U.S. car sales will slide a little more this year, experts agree, but most won’t attempt to predict any further. Morgan Stanley sees a technology-obsolescence inspired downturn which might require government help.
Meanwhile forecasts for 2018’s decline range from down 1.5 per cent to 5 per cent lower.
BMI Research reckons sales in 2018 will slip 1.5 per cent after a 1.1% fall in 2017.
“A positive note for 2018 is our Consumer team’s view that despite rising inflation and poor income growth, non-essential spending will grow at a faster pace than spending on essentials over our forecast period. But industry specific factors, such as growing second-hand inventories and a winding down of pent-up demand, will keep growth negative for at least the next two years,” BMI Research said.
The Center for Automotive Research (CAR) at the University of Duisberg-Essen in Germany is marginally less optimistic, going for a fall of 1.5% in 2018 to well under 17 million.
“Despite slightly increasing economic growth of 2.5 per cent in the USA, the U.S. car market will remain behind the sales of 2017 next year. In recent years, U.S. vehicle inventories have been significantly rejuvenated, driven by high discounts, cheap consumer loans and financing. In the saturated U.S. car market, fatigue symptoms are noticeable in the case of a rejuvenated vehicle fleet,” CAR’s Professor Ferdinand Dudenhoeffer said.
German investment bank Nord LB expects an up to 5% dive this year. Nord LB pointed out that the U.S. market has been exceptionally strong since the financial crisis of 2009 when sales were only 10.6 million.
Morgan Stanley is also at the bottom end of predictions, saying the fall this year will be 5% to 16.5 million.
Obsolescence factor
But its recently published forecast for beyond 2018 said quickening affordable technology gains to improved connectivity, safety and electrification will make even current vehicles look unattractive and dated.
“We stand by our view that the nearly $2 trillion of car value on the road will face unprecedented risk, contributing to a consumer credit challenge that threatens affordability of both new and gently used cars. This may necessitate government or policy intervention by 2019/2020 – cash for clunkers? – to keep U.S. (sales) from falling below 15 million. Policy intervention remains our base case by the end of the decade,” said Morgan Stanley analyst Adam Jonas.
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