The Car Recession

The American auto industry is not in a good way. That last sales report was not very good. Sales were down for the fourth month in a row.

Industry consultant Autodata put the industry’s seasonally adjusted annualized rate of sales at 16.51 million units, which was the lowest rate since February 2015. It came in below Wall Street expectations of 16.6 million vehicles and 2 percent lower than the June 2016 figure.

U.S. consumers continued to shun passenger cars in favor of larger pickup trucks, SUVs and crossovers. Passenger car sales were also hurt as some automakers, including GM, have moved to reduce relatively low-margin sales to rental agencies.

The U.S. auto industry has been bracing for a downturn after hitting a record 17.55 million new vehicles sold in 2016. A glut of nearly new used vehicles poses competition for new vehicle sales and automakers have relied increasingly on consumer discounts and loosened lending terms.

Car shopping website Edmunds said the average length of a car loan reached a record high of 69.3 months in June.

There’s even talk of how the auto financing boom was this decade’s version of the housing boom last decade. That’s probably pushing things too far.

Ford Motor Co said its June sales were hit by lower fleet sales to rental agencies, businesses and government entities, which fell 13.9 percent, while sales to consumers were flat.

Wall Street analysts worry that the millions of low mileage, off-lease vehicles poised to hit the market between now and the end of 2019 will weigh on future new vehicle sales.

Ford vice president for U.S. marketing, sales and service Mark LaNeve said on a conference call that the automaker has seen little evidence that its competitors are reducing their reliance on leasing to clinch a sale.

With OPEC losing their war against oil supplies, it appears that gasoline prices will head lower and lower. That’s good news for trucks and SUVs.

Posted by on July 5th, 2017 at 3:00 pm

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