Market researcher IHS Automotive is predicting the U.S. auto market is nearing its peak and will experience a "pull back" after 2017 as a result of rising interest rates and other factors.
While the U.S. Is still enjoying a strong demand now, "we do see headwinds starting to form," said Charles Chesbrough, IHS senior economist said at a briefing today on the firm's global outlook.
An expected rate hike by the Federal Reserve will increase borrowing costs for consumers and after 2017 "credit markets are going to be much more difficult," Chesbrough said.
He noted that surveys show banks are reporting demand for auto loans is starting to taper off and the banks themselves are tightening credit standards.
A less welcoming credit environment will force buyers to choose less expensive vehicles than they'd like, or to "pull out of the market all together," Chesbrough said.
For now, IHS sees U.S. sales experiencing a moderate dip after peaking at sales of 18.2 million vehicles in 2017 and "drifting back down to around 17 million by 2022, Chesbrough said. He stopped short of forecasting the kind of steep decline the industry has experienced in the past after sales peaked.
He pointed out that auto manufacturers are in a much stronger position today than in the past. They are no longer saddled with excess production capacity and are not forced to drive demand themselves through outsized incentives like employee-pricing deals.
Car makers also have much more accommodating labor contacts and have shed heavy retiree health care costs that had burdened their finances in the past.