For the U.S. auto industry, this year may be as good as it gets for a while.
A newly released report from AlixPartners forecasts U.S. light-vehicle sales of 17.5 million in 2017 -- down slightly from this year’s 17.8 million forecast.
The New York City-based consulting firm expects U.S. sales to bottom out at 15.2 million vehicles in 2019, followed by a gradual upturn to 16.8 million in 2022.
A downturn in 2017, following 17.8 million sales this year, would cap the industry’s winning streak at seven consecutive years of growth.
Causing auto sales to dip will be soft used-car prices, a slow-growth economy and modestly higher interest rates, says Mark Wakefield, AlixPartners managing director and co-author of the annual report.
“The biggest factor is used-car prices,” Wakefield told Automotive News. “We are also past the point where many people are getting jobs and buying cars.”
Wakefield cited several indicators that the industry’s winning streak is nearing the end:
- Incentive spending per vehicle was up 14 percent early this year, as automakers unloaded a glut of unsold small cars.
- The delinquency rate on subprime loans has spiked to 4.5 percent this year from less than 3 percent in 2011.
- Leases rose to 31 percent of new-car transactions in the first quarter of this year, up from 27 percent in the first quarter of 2015. A flood of off-lease vehicles will drive down used-car prices and dampen demand for new cars.
- More than 40 percent of nonluxury cars that are traded in will have negative equity this year, making it tougher for buyers to finance a new vehicle.