NEW YORK -- The U.S. auto industry appears to be firmly in the fast lane, at least for the next two years.
New-car sales are on track to expand for a sixth consecutive year in 2015 and face few major risks to the streak in 2016, economists said here today at the NADA/J.D. Power Automotive Forum.
J.D. Power forecasts 2015 retail sales at 14 million cars and light trucks, a 3 percent rise from 2014.
“Things look very bullish,” said John Humphrey, senior vice president for global automotive at J.D. Power. “At some point, you have to ask how long is this trend going to continue. We have had five very strong years, and 2015 is going to be strong too.”
Auto sales are being helped by an expanding U.S. economy, rising consumer spending, a steadily improving housing sector and low oil prices. Nariman Behravesh, chief economist at market researcher IHS, forecast the U.S. economy will expand 2.5 percent to 3 percent this year.
“All pistons are firing,” he said.
One of the biggest factors behind the bullish forecast is low oil prices. IHS estimates crude oil prices will remain at about $51 a barrel this year, and will creep up to $63 a barrel in 2016, well short of the $100 level that seemed to be the norm just a few years ago.
Cheap fuel, easy borrowing and a strong dollar are encouraging U.S. consumers to spend -- on cars and other products. “The U.S. consumer is back to being an engine of growth in the global economy,” Behravesh said.
The road ahead isn’t free of potential potholes, however. The long period of unusually low interest rates is going to end at some point, and Behravesh predicted the Federal Reserve will nudge rates higher in September.
The industry also faces more intense competition than ever. Automakers are expected to launch 27 all-new models this year, after adding 25 in 2014. Humphrey noted that not all new vehicles will be able to hit the volume levels needed to generate profits for their manufacturers.
In 2016, the market will also see a large number of vehicles coming off lease, a wave that could pressure vehicle pricing and trade-in values. Humphrey said 2.3 million vehicle leases mature this year, and 3.1 million in 2016, a 35 percent jump.
By comparison, many other markets around the world face more serious troubles, the economists said. In China, economic growth is expected to continue to slow for several more years, and at some point could see overcapacity in the auto sector, and declining profits for auto makers. “Yes, we are worried about China,” Behravesh said.
He also predicted the Russian economy will contract 5 percent this year, hurt by falling oil prices.