Cars sales are off to a strong start in 2014 despite the frigid weather that has gripped the U.S. during January. That could be particularly good news at a time when Wall Street is worrying about a new slowdown of the global economy.
Demand for new vehicles, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive, forecasts a 1% increase in total sales when all figures are in for the month. Power and LMC also predict that the seasonally adjusted annual sales rate, known as the SAAR, will reach 15.9 million units for January – well above the 15.6 million vehicles sold during all of 2013.
“We are forecasting January 2014 to have the strongest level of retail sales for a January since 2004, and transaction prices will be the highest on record for the month of January,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power. “In combination, the strong sales rate and record transaction prices are expected to result in record levels of consumer spending for the sector.”
Not everyone is quite so upbeat about January, though a forecast from Cars.com still anticipates a 0.3% year-over-year increase despite what has been a frigid cold month. The automotive sales site anticipates a more modest SAAR of 15.74 million units which would still be well ahead of the 2013 sales total.
“Industry sales started the year out on a relatively positive note and would have been even better if it wasn’t for the inclement weather negatively impacting car shopping in several major markets” said Jesse Toprak, Chief Analyst for Cars.com.
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The January surge is being fueled by a variety of factors, though most industry analysts believe that pent-up demand – buyers rushing back to market after delaying purchases during the recent recession – is largely drying up. But a surge of new products is helping draw buyers into showrooms. That’s especially apparent in the compact cross-over utility vehicle segment which currently accounts for 16.3% of industry retail sales, up 3.5 percentage points from last January.
“The growth of the CUV segment reflects the confluence of several factors, but most notably the availability of recently redesigned products that offer new technology and improved fuel economy,” said J.D. Power’s Humphrey. “However, gains in the compact CUV segment are coming at the expense of the midsize sedan segment, which has lost some momentum.”
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Total light-vehicle sales in January are expected to approach 1.1 million, a 1% increase from January 2013, as fleet sales are expected to remain below the level of a year ago and represent less than 20% of total light-vehicle sales for the month. Retail sales are expected to reach 847,400, a 3% increase from January 2013.
According to the Cars.com forecast for January, Chrysler will post a 6.5% gain for the month, the strongest of any major maker. Ford, General Motors and Toyota are expected to be the only two makers in negative territory year-over-year, with shortfalls of 4.3%, 1.8% and 3.2%, respectively.
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How much further the industry might climb in 2014 is a matter of much debate, with key forecasts covering a range of ground from just over 16 million to as much as 16.6 million. LMC Automotive is holding the forecast for 2014 at a modest increase of 600,000 units from 2013 to 16.2 million units for the total light-vehicle market.
“All systems are a go for a strong and stable U.S. auto market in 2014, with risk of not achieving modest growth diminished,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “We look for economic growth, a robust level of lease maturities, 70% more new model launches and an increase in consumers’ willingness to spend to be the major drivers of growth in 2014.”
(Paul A. Eisenstein contributed to this report.)