September Figures Show U.S. Car Sales Plateau

Oct 3, 2016

General Motors, Ford, Honda and Fiat Chrysler all saw their sales go down in September. On the other hand, sale of Nissans and Toyotas were up.

Car sales in 2016 are on pace with 2015, says Jessica Caldwell, senior analyst with Edmunds.com. In 2015, 17.5 million vehicles were sold.

Caldwell also says, "Just because we're not seeing the same amount of growth as we've had in the past six years, it's not a bad thing because we're on a record pace."

Caldwell says the fundamentals of the market surrounding cars remain strong. That's despite the fact that overall the sales of passenger vehicles fell 0.7 percent to 1.4 million last month. Caldwell points out that gas prices and interest rates are low which helps sales. The Conference Board which tracks consumer confidence has it at a nine-year high.

In a normal year, Caldwell says we'd be worried about a sales plateau but she says, "We're plateauing at the highest level ever. We're at point in which automakers are going to make money, dealers are going to make money and consumers are getting good deals."

Many industry watchers are concerned about an impending automotive recession. For six straight years, the auto industry has grown. Now, most analysts expect sales to stay at a plateau for a while and fall off eventually. Jack Nerad, executive market analyst with Kelley Blue Book, says, "September sales results have industry observers on the edge. Is this just a minor fallback in an otherwise solid year or does this indicate that a long overdue dip in car sales is coming ... and perhaps has already begun?"

That is the multi-billion dollar question says Nerad which will be answered in the final quarter of the year, "a [potentially] volatile final quarter that contains a hotly contested Presidential election," he adds.

Some of the growth of new car sales is being dampened by used car sales. Leasing as an option has grown more popular — more than 30 percent of new vehicles are being leased. That's up from 20 percent five years ago. That means more nice used cars are competing with new cars for sale.

"Taking the short view that the end is nigh is juvenile," says Eric Lyman, senior analyst with Truecar.com. "The end is nigh for sales growth but if you go back 10 years and tell executives for the foreseeable future that everyone would see 17 million in sales ... everyone would have been over the moon," he says.

Lyman sees demand falling off. That is a place for concern. Right now the industry is operating at full tilt, with automakers set up to produce vehicles that meet nearly record demand. If sales lag for a few months, Lyman sees the carmakers cutting back on production.

The analysts don't expect to see production cut until mid-2017. That has implications for auto workers. Ford, for example, has indicated that it would likely cut production. Lyman says until carmakers figure out demand, "it will be a wonderful time for consumers." Lyman and other analysts see sales incentives increasing in the coming months.

Copyright 2016 NPR. To see more, visit http://www.npr.org/.