U.S. sales forecast to rise in June before tailing off
After U.S. sales of new vehicles grew in the first half of 2018, the market could be near a tipping point and decline during the second half, according to three forecasts issued this week.
Forecasts from Cox Automotive, Edmunds and LMC Automotive/J.D. Power call for June U.S. new-vehicle sales to rise between 2.1 percent and 3.4 percent.
"All indicators tell us that we have reached peak market and it won't be getting better from here," Charlie Chesbrough, senior economist for Cox Automotive, said in a statement. "Monthly sales volume in June is expected to rise over last year, but June has one additional selling day this year — 27 instead of 26 — and the pace is not expected to rise very much."
The LMC/J.D. Power forecast estimates that retail sales, a key barometer of the industry's health, will rise 3.2 percent compared with June 2017.
Automakers are scheduled to report U.S. deliveries for June on Tuesday, July 3. The industry will include sales through July 2 toward June's tally because the last day of the month is a Saturday.
U.S. sales have climbed 1.2 percent this year through May, after declining in 2017 for the first time since the market collapse of 2008-09. Industry volume hit a record 17.55 million in 2016.
"June sales look a bit healthier than they actually are because there was an additional selling day and weekend this year," Jeremy Acevedo, manager of industry analysis at Edmunds, said in a statement. "On a daily selling-rate basis, June sales were actually lower than last year. This is exactly in line with how the rest of this year has gone: Sales look strong, but there are other factors at play that make this success a bit fragile."
LMC/J.D. Power and Cox forecast a seasonally adjusted, annualized sales rate of 16.9 million vehicles for June, in line with the previous month's SAAR. Edmunds pegs the June rate at 17.1 million, which would equal the average SAAR of 17.1 million through the first five months of 2018.
The SAAR topped 17 million units for eight consecutive months before falling below that level in May.
Analysts say favorable buying conditions, widely available credit, improving wages and employment, tax reform and elevated incentives are contributing to higher consumer interest in new vehicles this month.
But they also warn the market faces headwinds from rising interest rates, uncertainty over the effects of tariffs on new-vehicle prices, and a rise in late-model, used vehicles.
"Tariff threats remain at center stage," Jeff Schuster, LMC's senior vice president of forecasting, said in a statement. "The high level of uncertainty and expected negative effects are causing profit and volume warnings. A trade war involving vehicles would be devastating to sales volume in the United States and other key markets. No one wins when more than a million units annually are at risk in the U.S."
Incentive spending to date in June is averaging $3,765 a vehicle, according to LMC/J.D. Power. The companies' jointly developed forecast shows the industry's average transaction price rising to a June record of $32,169, $533 more than the previous high for the month of June, set last year.
The average new-vehicle transaction price in the first six months of the year is expected to hit a record $32,221, $824 more than the previous high for the first half of the year, also set in 2017.
Rising demand for light trucks, notably crossovers, is driving higher transaction prices.
Cox Automotive, citing strong first-half demand, sparked in part by the benefits of U.S. tax reform, has increased its full-year industry sales forecast by 100,000 units to 16.8 million. Edmunds also predicts 2018 volume at 16.8 million, while LMC projects 17.1 million.
All three analysts also are predicting continued growth in crossover and SUV sales, despite rising gasoline prices.
Cox and Edmunds project FCA US will post a sales increase of at least 7 percent from June 2017, the best among major automakers. They forecast General Motors and Hyundai-Kia will gain market share while sales are expected to be flat at American Honda and Volkswagen Group of America.
Nissan North America's sales are expected to fall at least 7 percent. Cox Automotive sees June sales falling at Ford Motor Co. and Toyota Motor Corp., while Edmunds projects June gains for both automakers.
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