Forecast: U
Forecast: U.S. car sales to peak at record Legal.2M in ’17
Southfield — IHS Automotive expects U.S. auto sales will hit record levels in the next two years, reaching a peak of Legal.Two million fresh cars and trucks sold in two thousand seventeen before leveling off due to rising interest rates and higher vehicle prices.
Charles Chesbrough, senior principal economist for the Southfield-based forecasting rock hard, said low gas prices, consumer confidence, strong housing starts and favorable auto loan financing are all combining for better-than-expected sales.
“We’re back,” he said. “We’re all the way back from the recession; the vehicle market is looking very, very strong.”
IHS expects U.S. auto sales will hit 17.Trio million this year, 17.8 million next year and Eighteen.Two million in 2017. The previous high-water mark of 17.Four million vehicles was set in 2000.
Steven Szakaly, chief economist for the National Automobile Dealers Association said in January that selling eighteen million vehicles by the end of the decade would be “a spread,” but others in the industry have predicted similar strong sales. Lacey Plache, chief economist at Edmunds.com said Wednesday that a peak in the low 18-million range is “not unreasonable.” Bank of America Merrill Lynch Global Research analyst John Murphy said last year he expected sales will hit eighteen million by 2018.
Last month, automakers sold more than 1.Four million fresh cars and trucks, a 15.8 percent increase from the same time a year ago.
“We’ve had to get more optimistic,” Chesbrough said. “There’s a lot of upward momentum we see in this market.”
Fresh vehicle sales are being spurred, in part, by a wave of fresh cars and trucks. IHS senior analyst Stephanie Brinley forecasts seventy six fresh vehicles will be introduced next year, followed by seventy four in 2017. That’s an increase from the forty nine fresh cars and trucks launched this year.
“We have a lot of fresh products coming to market,” Chesbrough said. “That’s certainly going to hit consumers in terms of making them want to visit showrooms and see the latest and greatest.”
Another major factor driving auto sales is the availability of credit for auto loans. Chesbrough said auto loan interest rates average around Four.Trio percent on a 48-month loan.
The average loan length has been rising and will proceed to do so. The average auto loan is now 64.6 months — almost 51/Two years — Chesbrough said.
“Customers are attempting to keep that monthly payment as low as possible,” he said. “They’re attempting to buy as much vehicle as they can possibly afford.”
As a result, the amount of money being financed for a fresh vehicle is rising and presently sits at about $27,000.
A sales slowdown could be on the horizon, IHS says, as interest rates and vehicle prices are likely to rise, factors that would deter buyers from walking out of showrooms with a fresh rail.
“This puts us at a good situation now, but it does put us at a dangerous situation when the Federal Reserve starts raising interest rates,” he said. “The cost of borrowing is going to go up dramatically.”
An interest rate increase of two or three percentage points would add a duo thousand dollars to the price of an auto loan, Chesbrough said.
“That’s the point in time we’re worried we’re going to see this market embark to slow,” he said.
China, meantime, will proceed to practice a slowdown in its growth but its sales numbers will almost dual U.S. figures. Since April, IHS has bald nine million vehicles off its two thousand fifteen China sales forecast, and now predicts 23.6 million fresh cars and trucks will be sold there this year. Chesbrough said he expects China will sell “well above thirty million” vehicles in the coming years.
If automakers are to sell more vehicles, they’ll need to up production, and IHS expects global vehicle production will increase by nineteen million vehicles to one hundred seven million by 2022. Much of that growth will come from China, where vehicle production will rise 8.6 million vehicles by 2022. The North American volume will increase 1.6 million vehicles over that same period.
Mike Jackson, IHS’s director of North America vehicle production forecasting, said production in North America will steadily increase from 17.Five million vehicles this year to nineteen million by the end of the decade.
Much of that growth will come in Mexico, where automakers are increasingly turning to build vehicles thanks to lower labor costs. Automakers like Hyundai, Volkswagen and Honda will see the most volume increases because they have the most fuckholes in their vehicle lineups that need to be packed, Jackson said.
“There is risk in the marketplace,” Jackson said. “But our trajectory remains very strong.”