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Industry Experts Predict Decreased July Sales

Although official numbers aren’t in yet, new car sales for July are expected to be lower this year than they were last year.

The July LMC Automotive and J.D. Power Forecast  predicts sales are projected to reach 1,156,200 units. That is a 3.2% decrease compared with July 2017. July will also mark the 5th time sales have dropped this year.

Jeff Schuster, President, Americas Operations and Global Vehicle Forecasts at LMC Automotive, said that's not totally shocking, “With the first half of 2018 being slightly ahead of volume expectations, the second half is poised for a pullback from the robust second half of 2017. July’s expected performance is consistent with that notion.”

Even with lower July sales, there is a silver lining according to J.D. Power.

“While it’s disappointing for the retail sales pace to post declines again, it’s important to remember that July only has 24 selling days this year, the fewest for the month since 2012 and one less weekend than last year,” said Thomas King, Senior Vice President of the Data and Analytics Division at J.D. Power.  “More notable is that incentive spending is on pace to post year-over-year declines for the first time in 54 months.”

After 54 consecutive months of year-over-year increases, incentive spending is forecasted to fall by 5% this month. Incentive spending through the first two weeks of July was $3,665 per unit, down $204 from the same time last year.

Potential tariffs and taxes coming down the line could also be causing a fall in sales Schuster said, “Short-sighted tariffs—and retaliatory responses—are the most significant risk factor for the U.S. and global markets. In fact, significant escalation of tariffs could derail America’s strong economic growth and even push the market into a premature recession.”

But not everyone feels that way. Cox automotive has a different theory.

“The U.S vehicle market remains strong and all the talk of higher interest rates and trade tariffs are not chasing away buyers,” said Charles Chesbrough, senior economist at Cox Automotive. “In fact, the threat of higher prices on the horizon may be driving more shoppers to the showrooms now.”

Overall, July started strong with Fourth of July sales and soon after, sales dropped. Manager of industry analysis at Edmunds, Jeremy Acevedo,  says this will be the trend for the rest of the year, "Sales likely slowed down due to a dry-up of deals as automakers wrapped up Fourth of July sales," said Acevedo. "As consumer wallets get increasingly squeezed by rising prices through the second half of the year, holiday sales events may play an increasingly significant role in getting shoppers to the dealership."

 

Chris K.

Fluctuations make the news a lot, but aren't they are also quite normal and tend to detract from the overall picture  when you parcel out specific fragments of a dealers operations? Car dealers are also historically funding their business model more so from their fixed operations than sales, especially with the lower grosses with the internet, in order to be transparent and competitive. But service and parts, rentals, accessories and also F&I bring in the working capital dealers require. A car dealership looks more like a colorful pie, with slices composing all profit centers, so the real picture comes into view. Moving into 2019, dealers should evaluate all profit centers critically, then approach and shutter non-productive relationships and vendors, and then find more cost-effective replacements. That's why I look outside the auto tech sphere for help, it's in great supply and costs seem to be lower. My non-auto vendor chat service is $187 not $995 for the same auto vendor service. I look at what vendors cost us long term to assess the real cost. Is a snippet of code worth $500 per month if you are earning that back ten fold. No. If we have them on 5 years, that's $30,000. Could we instead go onto Stackexchange, or other tech guru sites and ask for a solution to replace that? Yes. If you can then buy the similar technology and own it for $150, that is the way to go. It all adds up. Time to be very critical of these low cost add-on, we can replace with tech we own, not rent.

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