Carmakers are quick to point out that one month of sales figures don’t represent a trend, but analysts are now predicting that new vehicle sales are poised to slide again in February, following the drop in January.
Edmunds, a leading car shopping and information platform, is predicting 1.27 million new cars and trucks will be sold in the U.S. this month for an estimated seasonally adjusted annual rate or SAAR of 16.8 million.
The figures reflects a 10.8% increase in sales compared with last month, but a 4.1% decrease from February 2017, Edmunds said.
“This year is going to be a bitter but necessary pill for the auto industry to swallow,” said Jessica Caldwell, Edmunds executive director of industry analysis.
(New vehicle sales hold steady in January. Click Here for the story.)
“Automakers are slowing production of passenger cars to react to declining demand and are also trying to find the right balance between keeping sales strong and becoming too dependent on costly incentives. The industry is still in a fairly healthy place, but it may not feel like it since the last few years have been in record territory,” Caldwell said.
While Presidents Day weekend marked the first auto sales event of the year, Edmunds analysts say automakers likely didn’t pull out all the stops to get customers into the showrooms. Average incentive spend hit a record high of $3,400 in 2017, and Edmunds analysts say that wasn’t a sustainable level.
“In a down market every sale is important, but this year automakers seem to be a bit more measured in how they’re using incentives,” Caldwell said.
(Click Here to see more about Toyota’s dominance of Consumer Reports top 10 list.)
Caldwell noted aggressive incentives generally pull forward existing demand, and automakers seem to be finding that you can only borrow so much from the future before you end up paying for it.
However, manufacturers could be reluctant to reduce incentives in a market that is tighter and more competitive.
“With the pie getting smaller, you’ll probably see incentives continuing on the most profitable vehicles as well as where automakers do not want to lose their market share,” said Brad Korner, general manager of Cox Automotive Rates and Incentives.
(To see more about global auto sales hitting a record this year, Click Here.)
Only Toyota, Volkswagen and Audi are expected to escape the downward pressure in February, according to Edmunds forecast. Toyota sales will remain flat while VW and Audi will report a small increase. Every other major automaker is expected to see its sales decline, Edmunds predicted.