Dealer lots are expected to see less traffic this month as the industry recovers from a white-hot December.

After a robust December that pushed the auto industry to record levels, sales are expected to retreat in January as carmakers regroup, analysts said.

Edmunds, one of the industry’s top shopping and information platforms, is predicting 1.153 million units cars trucks will be sold in the U.S. in January, for an estimated Seasonally Adjusted Annual Rate of 17.7 million units, which represents a 31.5% drop in sales from December 2016, and a 0.7% decrease from January 2016.

New vehicles ales are expected to 3% year-over-year to a total of 1.13 million units in January 2017, resulting in an estimated 17.4 million seasonally adjusted annual rate, according to Kelley Blue Book, the vehicle valuation and information source. 

“After a record December capped a new record year of vehicles sales in 2016, January figures appear to be enduring a hangover effect, potentially falling more than half a million units from the previous month,” said Alec Gutierrez, senior analyst for Kelley Blue Book.

“However, January is typically the weakest month of the year for sales, as winter weather sets in and consumers recover from big spending over the holiday season. In addition, many potential sales were likely pulled ahead into December as consumers opted to take advantage of the ample inventory and incentives available industry-wide.”

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Gutierrez also said incentive spending is a concern as it continues to rise across the industry and he suggested another record in 2017 would likely require relatively undisciplined sales tactics driven by incentives, leasing and longer loan terms.

Kelley Blue Book’s 2017 forecast calls for sales in the range of 16.8 to 17.3 million units, which would represent a 1 to 4% decrease from 2016, he noted.

Overall, retail sales are expected to account for 79.2% of volume in January 2017, down from 79.9% in January 2016.

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“With multiple new products on the market and looking to put the diesel scandal in the past, Volkswagen Group should report large year-over-year increases, and start to gain back market share,” said Gutierrez.

“While new cars like the Volkswagen Golf Alltrack and redesigned Audi A4 are contributing to the automaker’s growth this month, SUVs like the Tiguan and upcoming Atlas will have to become bigger players to help Volkswagen transition its sales mix toward the growing consumer preference for utilities.”

American Honda also should do well in January 2017 with expected growth nearing 5%. The manufacturer’s line-up of SUVs will be primarily responsible for the gains. In fact, sales of American Honda SUVs could increase 20%, highlighted by the redesigned CR-V and smaller HR-V.

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“January had the potential of being a very slow month at dealerships, given the fact that auto sales shattered records in December,” said Jessica Caldwell, Edmunds executive director of industry analysis. “But January is shaping up to be a surprisingly healthy month. The economy continues to show signs of strength and consumers are feeling confident, boosting auto sales above initial expectations.”

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