Sorry, Shoppers: October Auto Sales Expected to Slip, Along With Incentives
Analysts are projecting U.S. light vehicle sales will decline in October as incentives do the same. Could they possibly be related?
While we don’t have have official figures on how much of the domestic population has a limitless supply of cash, our collective intuition suggests most do not. This leads us to believe the elevated cost of owning an automobile has likely impacted deliveries for this month. Fortunately, the experts seem to agree, predicting the lowest October volume since 2014.
New vehicle incentives have been on the decline for a while now. This looks to be the fourth consecutive month without a rebound — which would make it the longest time frame since the recession, according to J.D. Power. That’s not necessarily a bad thing for automakers, since they’re losing less money on every model sold.
Consumers are less than enthralled by the trend, hence the faltering volume. But that’s alright with automakers, especially those able to move a lot of trucks — which offer manufacturers a wider profit margin. But dwindling demand is probably not entirely due to higher prices. It’s an accepted fact that U.S. market growth has more or less plateaued, helping OEMs make the decision to switch tactics.
“For manufacturers, the financial benefits of continued growth in truck mix along with reduced incentives is helping to offset the effect of reduced sales volumes,” said Thomas King, Senior Vice President of the Data and Analytics Division at J.D. Power. “Manufacturers have succeeded in better aligning production with consumer demand, which is the primary driver of reduced incentive levels. Given those reduced incentive levels, the overall outlook for the financial health of the industry is positive despite the lower sales volumes.”
Cox Automotive estimates a 6.6 percent decline in October sales vs last month and a 1.9 percent drop against last October, while J.D. Power is a bit more forgiving and Edmunds less so. Either way, volume is falling while interest rates and prices are on the rise. Average transaction prices appear on pace to land around $32,947 at the end of this month, surpassing the previous record set exactly one year ago by $489.
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