It's increasingly clear that U.S. auto sales have peaked after an impressive seven years of growth. April's 4.7 percent drop in volume, the largest of four consecutive monthly declines, was more confirmation of prevailing forecasts that 2017 will retreat from last year's record.
The U.S. auto industry must adapt to the changing business environment, shifting from keeping up with expanding demand to the greater challenge of remaining profitable while building and selling fewer vehicles.
So far, most manufacturers and retailers show signs that they are prepared for a downturn.
Following back-to-back sales records, U.S. light-vehicle volume is down 2.4 percent through the first four months. But the industry faces mounting challenges that pose more risk than a mild sales decline suggests.
Interest rates are rising from historic lows, factory incentives are the highest in years, more vehicles are coming off leases into a crowded used market and average auto loan terms have grown to record lengths. The abrupt swing in consumer demand from cars to crossovers and SUVs has disrupted manufacturers' production processes and shows no sign of abating.
In addition, used-vehicle values are declining, but in recent months even that has been overshadowed by swollen new-vehicle inventories. In April, 8 percent of total sales were leftover 2016s, almost triple the normal rate this far into a new model year.
But the industry has come a long way since the last calamitous downturn, ending most of the unwise practices that contributed to the 2008-09 crisis. And a steady cadence of growth during a seven-year recovery and expansion has given automakers, suppliers and retailers a chance to rebuild financial reserves.
A downturn is a scary prospect to industry veterans who vividly remember the last one.
But so far in this cycle, as U.S. sales growth has slowed the industry has maintained discipline in matching production to demand.
That resolve will be tested even more.
Automakers, suppliers and retailers must closely monitor changing conditions and employ sustainable business practices.