New forecast: Auto sales may fall short this year – USA TODAY
Two new forecasts have lowered their estimates of new-vehicle sales this year — an important barometer for the overall economy — and one of them predicts sales are likely to fall below last year’s record levels.
LMC Automotive says it believes that its downward revision will mean that auto sales will break their seven-year streak by not rising. The other forecast, from TrueCar, says auto sales will still increase just by not as much as it had previously expected.
LMC and TrueCar cite roughly the same reasons for the decline in auto sales this year. 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 vehicles, or a 1.7% reduction from the previous forecast. It’s enough to bring the total slightly under last year’s 17.44 million. (Autodata, which USA TODAY uses as its primary source for auto 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,” says LMC’s Schuster.
He was careful to add, however, that a modest decline “does not necessarily signal that further contractions or an automotive recession is imminent.”
Other forecasters aren’t ready to throw out their predictions just yet.
Edmunds.com stands by its prediction that auto sales will hit 18.1 million in 2016. “We still forecast a record-breaking year,” says spokesman Aaron Lewis. “We’re going to see what summer has in store before we make any changes.”
Same, too, for Kelley Blue Book, which is 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,” says KBB analyst Tim Fleming. He noted that in the two months this year that sales have dipped, they came bouncing back strong the following month.
Potentially most troublesome for the auto industry, the bulk of the decline due to LMC’s revision 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 that’s not worrying LMC or TrueCar: Neither believes demographic shifts will be a major factor going forward as Millennials become a bigger player in car sales. Nearly the same percentage of Millennials are buying cars now as in the past, Schuster and Lyman say. “We believe they will perform like past generations,” Lyman says.
The revision also predicts growing auto sales through 2023, but still below what would have been expected otherwise without the change.
LMC’s rosy outlook in later years is based on the belief that the U.S. economy will continue to expand, averaging 2% gross domestic product growth over the forecast period.