A look at sales trends and forecasts in the US automobile industry

A report by the National Automobile Dealers Association (NADA) has forecasted that the sales of new cars and light trucks in 2019 will be 16.8 million units. This would be down about 1.1% from the estimated 17 million units for 2018.

NADA anticipates new vehicle sales to reach 17 million units in 2018, marking the fourth consecutive year of auto sales of over 17 million units in the US. The major portion of these sales comprise crossovers, SUVs and pickups.

The report stated that light trucks are on track to account for around 70% of sales in 2018, while cars will account for about 30%. This compares to a sales mix of 48% light trucks and 52% cars a decade ago. One of the main factors for this increase is said to be lower gas prices and the fuel efficiency of crossover vehicles. Gas prices are expected to remain low in 2019.

Manufacturer-backed certified preowned (CPO) sales grew 2.2% through November 2018, which is a positive sign for new-car dealerships and consumers. However, there is a chance that higher prices could push customers out of the new-vehicle market.

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Higher interest rates for new vehicle funding could also pressure customers. Average interest rates have increased meaningfully so far this year from 2017, leading to an increase in the cost of borrowing. Interest rates are expected to increase in 2019. All these factors could lead to more consumers buying used cars.

NADA does not expect the macroeconomic conditions seen in 2018 to repeat in 2019 which is also a reason for the projected decrease in new vehicle sales. The report said that in general, new car dealers were optimistic about 2019 as well as new technologies like electric vehicles.

Leading automobile companies in the US like Ford Motor Company (F) and General Motors (GM) have been making changes to their product lines based on the growing preferences for SUVs and crossovers.

In November, Ford’s total vehicle sales in the US dropped 6.9% from the same period last year. While the sales for trucks and SUVs dropped 2.3% and 4.9% respectively, the sales for cars fell 19.5%. A stronger mix of trucks and SUVs increased the company’s average transaction pricing to a record $37,000.

In October, General Motors reported a double-digit growth in large SUVs during the third quarter of 2018. Strong sales of trucks, crossovers and SUVs drove an increase in average transaction prices to a record $35,974. Last month, GM said it was cutting the production of passenger cars and closing some of its facilities that produce these cars.

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