Auto sales could approach record levels this year as incentives foster retail demand, with 2017 seen as a pivotal year amid uncertainty about how policies enacted by a new US government will impact the vehicle industry, according to forecasts from J.D. Power and LMC Automotive.
LMC’s forecast for full-year total light-vehicle sales of 17.4 million units “has increased slightly and now is on the cusp of topping 2015 by 10,000 units,” according to a release on Wednesday. For 2017, LMC is also projecting 17.4 million units.
Markets have so far “shrugged off adverse policy risk related to trade and immigration under President-elect Trump and are expecting a fiscal stimulus boost that could spill over to autos,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “Stimulus watch, combined with the likelihood that incentives have pulled forward retail demand and will push 2016 to a near-record level, is making 2017 a pivotal year directionally for auto sales. The economy and industry could be facing a boom or bust depending on which policies are focused on and implemented.”
Donald Trump’s election last month has aided record rallies in US stocks on hopes that the Republican’s administration will enact pro-business policies, lighten regulations and cut corporate taxes. The automotive sub-sector of the Standard & Poor’s 500 consumer discretionary group has gained 3.3% over the past month, outperforming the broader measure’s 2.9% increase.
Vehicle sales in the US are seen declining in November, although prices are poised to climb with the upcoming Thanksgiving weekend seen as key, J.D. Power and LMC forecasts showed.
New vehicle retail sales are seen falling 2% from November 2015 to about 1.13 million units on a selling-day adjusted basis. Total new-vehicle sales are expected to drop 3.4% to 1.38 million, the forecasts published Wednesday show. The average new vehicle retail transaction price so far is $31,645, a record for the month and compared to $31,397 in November 2015.
“While sales volume was suppressed for a short period during the election, the declines were quickly recouped by the end of the election week,” said Deirdre Borrego, senior vice president and general manager of automotive data and analytics at J.D. Power. “Although we are forecasting another decline in retail sales, it is important to note that in absolute terms vehicle sales remain close to record levels while transaction prices are at record highs.”
The pace of sales is being partly driven by incentives, which “represent a meaningful risk to the long-term health of the auto industry,” Borrego said. Incentive spending in November so far is $3,886 per unit, up 15% from $3,374 a year ago and second-highest level ever behind $3,939, the record set in September.
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