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Analysts Say Decline In Auto Sales Is Coming

January 3, 2017 0 Comments

Car Dealership

Although automakers are on the cusp of a record-breaking year for 2016 sales, analysts are predicting that a slowdown will occur in 2017.

Some analysts are forecasting that 2016 will beat the previous year’s sales of 17.5 million automobiles by as little as 5,000 vehicles. If these projections prove correct, 2016 will mark the seventh consecutive year of rising automotive sales.


“This [streak] has been pretty much unprecedented, at least in the modern era of new vehicle sales growth,” said Karl Brauer, an analyst at Kelley Blue Book.

However, the majority of analysts believe that the sales growth is now coming to an end. Analysts believe that automakers have finally exhausted the pent-up demand for new cars that went unfulfilled during the depths of the recession, when many consumers were deferring expensive purchases. Projections for the upcoming year show a decline in sales, although many analysts believe sales will remain strong in the short term.

Jeremy Acevedo, a senior analyst at Edmunds.com, says that signs of the difficulties ahead are already apparent, as cars now spend more time on the lot before they’re sold in comparison to one year ago. In October and November, cars sold took an average of 71 days to move, which is up from an average of 63 days during the fourth quarter of 2015.

The decreasing demand has led some automakers to discount prices, extend financing and offer other incentives in an effort to unload their inventory more quickly. Autodata figures provided by Kelley Blue Book indicate that financial promotions, including rebates and discounts, averaged $3,303 across the industry through November 2016, which is up 13.6 percent in comparison to the previous year.

“Those numbers definitely indicate automakers are trying to stimulate demand that might be waning a little bit,” Acevedo said.

There is an expectation that the declining market will result in dealers being more willing to reduce prices in negotiations or offer lenient financing options. It is also expected that automakers will unveil sleek exterior designs and high-tech features in an effort to entice customers who may want to upgrade their older models.

“We’re going to see how hard each of them individually fights to increase their own numbers at the cost of someone else’s numbers,” Brauer said. “When the pie stops growing larger … you have to steal it from someone else’s share of the market.”

Brauer believes that although the auto industry is now poised to experience a slowdown, automakers shouldn’t complain too loudly, considering how troubled the U.S. auto industry was several years ago. In 2009, the federal government spent $80 billion to save Chrysler and GM, with the Obama administration explaining that allowing the companies to fail would have dealt a massive blow to the already wounded economy. Sales of new cars and light trucks dropped to 10.4 million in 2009, and have steadily climbed in the following years to their current peak. New-vehicle sales in 2015 surpassed the previous record of 17.3 million cars, which was set in 2000.

“They all want to look at their charts and see nothing but up and to the right, but … if we stay here for the next couple of years, everyone will be doing really well,” Brauer said.

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The DrivingSales News team is dedicated to breaking the relevant and the tough stories affecting car dealers. Have questions for DrivingSales News? Reach the team at news@drivingsales.com.

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