Is 17.7 Million 2016 Sales of Light Vehicles in the US a Fantasy?

Sailing against the Chinese low tide, Steven Szakaly, chief economist of the National Automobile Dealers Association said today that U.S. sales of new cars and light trucks will set an all-time record in 2016.

“We are living peak auto sales right now, and we will see one more year of that growth in 2016,” Szakaly added. “But only because of rising incentives that will keep consumers coming into showrooms. The real worry now is whether we’re starting to pull sales ahead from future years.”
“More than 17.7 million new light vehicles will be purchased or leased during 2016, about a 2% increase from 2015, and setting back-to-back records,” Szakaly said. “It will be the seventh consecutive year of auto sales growth.”

During 2015, a record 17.4 million new light vehicles were retailed, up 5.8% from 2014, according to WardsAuto. The average transaction price of a new car and light truck was $33,269 in 2015, according to NADA.

Szakaly added that in the battle for market share, automakers are expected to increase incentives this year to manage increased manufacturing capacity, and to offset the effects of a slowing global economy, especially in emerging markets.

“If we were looking at a market with stable global growth and no increases in manufacturing, auto sales might actually fall in 2016,” he said. “But we have a situation where plants have been built, demand is slowing, and the U.S. market remains the most profitable in the world. Growth in places such as Mexico will offer some temporary reprieve, but it won’t be sufficient to offset falling demand from Brazil, South Africa and other emerging markets. This means incentives will rise to stoke demand.”

Sustained sales momentum in 2016 is also dependent on expectations that auto financing rates will remain competitive, with interest rates rising modestly – by less than 1% by the end of 2016; wages will grow about 2.5% this year; and the economy will add more than 2 million net new jobs in 2016, Szakaly added.

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