The torrid pace of sales that should see the U.S. auto industry set a record this year is likely to continue into 2016, but next year could see the end of an unprecedented recovery after the worst downturn the industry has experienced since the Great Depression.
Sales are likely to begin “gently” leveling off next year after hitting an all-time peak of 17.7 million cars, trucks and crossovers, forecasts Steven Szakaly, the chief economist at the National Automobile Dealers Association.
“The industry remains healthy and continues to grow,” said Szakaly, during a media conference call ahead of the start of the 2015 L.A. Auto Show. But he went on to warn that, “We’re also seeing the beginning of the end of what has been a tremendous amount of pent-up demand for light vehicles.”
Automakers have been seeing light at the end of what was a long tunnel during the nation’s economic meltdown. In 2009, the market dipped below 10 million and saw two of the three Detroit makers, General Motors and Chrysler, plunge into bankruptcy, emerging only with the help of government bailouts.
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The recovery that began the following year was tenuous, at best, and many analysts initial forecast that the market would fall well short of a new record during the up side of the economic cycle. But things began to heat up in 2013, gaining more and more momentum ever since.
A variety of factors have been credited, including cheap loans, factory incentives and low fuel prices – which have also encouraged consumers to purchase larger and more expensive products, notably including light trucks.
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Pent-up demand has also been a factor. Millions of Americans postponed buying vehicles during the downturn and have been returning to the market as their own economic fortunes have improved.
As TheDetroitBureau.com reported Monday, 2015 sales have already exceeded almost anyone’s expectations, climbing 5.8% year-over-year through the end of October. Stacey Boyle, an analyst with data tracking service TrueCar, said she anticipates “it will be a photo finish” to see if 2015 will exceed the previous record of around 17.4 million vehicles sold in 2000. Other analysts are more confident the record will fall by December 31st.
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According to NADA’s Szakaly, U.S. sales will rise another 2.3% in 2016, to 17.71 million vehicles which, he said, “would mark the seventh straight year of increasing U.S. new-vehicle sales.”
That said, he and other industry-watchers see a number of reasons why the auto market will likely begin to level off within the next 12 months.
There is the likelihood of an interest rate hike by the U.S. Federal Reserve, as well as the declining impact of pent-up demand as most buyers fulfill delayed purchase needs. There are also a number of uncertainties, such as the price of oil and the potential impact of ongoing Mideast troubles – including the possibility of a new war with the Islamic State.
“In the long run,” the NADA analyst said, “new-vehicle sales cannot be sustained above 17 million units.”