U.S. new vehicle sales pace expected to slow

January’s new vehicle retail sales pace in the U.S. is expected to decline in January, according to a forecast from J.D. Power and LMC Automotive.

The seasonally adjusted annualized rate (SAAR) for retail sales in January is expected to be 13.7 million units — a decline of 150,000 units from the same period in 2017. Actual retail sales for January are projected to reach 893,900 units, a 2.7 per cent year-over-year decrease.

“Coming off a strong sales period to close out 2017, a slower start to the year was anticipated,” said Thomas King, Senior Vice President of the Data and Analytics Division at J.D. Power. “After the industry’s emphasis on the sell-down of old model-year vehicles in December, January is a transition month as manufacturers shift focus towards 2018 model-year vehicles.”

Average transaction prices for new vehicles have increased to $32,169 in January — a record for the month. However, the challenge for 2018 is more about maintaining incentive discipline after “coming off a year when incentive spending per unit reached the highest level ever recorded,” said King. Average incentive spending through the first two weeks of January reached $3,733 — up $94 from the same period last year.

Another concern is the North American Free Trade Agreement (NAFTA) and the impact it may have on 2018 sales numbers. Optimism for a solid 2018 is growing, according to Jeff Schuster, Senior Vice President of Forecasting at LMC Automotive, as “Most variables are aligned favourably, with the majority of that positive weight being carried by an expected boost in the economy.” However, he also adds that the wildcard for the year is NAFTA.

“If the U.S. withdraws from NAFTA, economic growth will likely be reduced, the stock market volatility will increase and consumer goods, including vehicles will likely increase, causing a more pronounced pullback in vehicle demand in the second half of 2018 and into 2019,” he said.

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