Some wage growth, declining gasoline prices and continued low interest rates on auto loans will increase new vehicle sales in 2016, Steven Szakaly, chief economist of the National Automobile Dealers Association, said today on the eve of the Los Angeles Auto Show.
“New vehicle sales will rise to 17.71 million units in 2016, a 2.3% increase from the Nada forecast of 17.3 million light vehicle sales in 2015,” Szakaly said. “This would mark the seventh straight year of increasing U.S. new vehicle sales.”
Still, the auto industry faces several challenges, including increasing length of auto loans that is keeping potential buyers out of the market for longer periods, supported by the increasing quality and durability of vehicles. The increase of leasing with a corresponding increase in the supply of used cars provides an alternative to new car purchases as well.
Szakaly observed that the industry is now seeing the end of “pent up demand” that came about during the Great Recession when annual car sales from 2009-2013 were less than 16 million units.
Without large automaker incentives, new-vehicle sales will likely peak in 2016, then remain flat in the 16.8 to 17 million range for the next couple of years.
“We expect rising incentives and for automakers to use their increased manufacturing capacity to chase market share and volume in 2016,” he said. “In the long run, new-vehicle sales cannot be sustained above 17 million units because of rising interest rates, increasing regulatory compliance costs and wage and income pressure. While we expect 2016 to be an excellent sales year, we forecast new-vehicle sales falling to 17.2 million units in 2017.”
He added that wages will grow only about 2% over the next 12 months, and interest rates are likely to rise by 50 to 75 basis points by year-end 2016.
2015 Auto Sales Remain Strong
For 2015, NADA has increased its sales forecast of new cars and light trucks to 17.3 million, and nearly 17.8 when including medium- and heavy-duty commercial trucks.
“At this point, the auto industry remains healthy and continues to grow on improving conditions for households, he added. “The formation of new households is rising, which is resulting in increasing auto sales and strengthening the overall economic recovery. There is nothing better for the housing market and car sales than people getting married and having children.”
During a long recovery cycle, 2015 would represent the sixth year of overall US sales growth since 2009, he said.