Patrick Manzi, Senior Economist
A look at the U.S. economy
Patrick Manzi, Senior Economist
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NADA has forecasted sales of 16.8 million new cars and light trucks in 2019, which would represent a decline in sales of about 3 per cent compared to 2018, according to Patrick Manzi, Senior Economist, National Automobile Dealers Association (NADA).
U.S. new vehicle sales totalled 17.3 million units in 2018, marking the fourth straight year of sales above 17 million units. Even with the anticipated decline 2019 numbers, Manzi said it will be a “very solid year, both for new vehicle sales and used vehicle sales,” adding that “all those off lease vehicles (are) coming back and they’re going to peak in 2019.”
As for profitability, Manzi said the number still sits around 2-2.5 per cent and is expected to “bounce around.” Relief in terms of interest rates would certainly help dealers, but whenever their expenses go up — profitability hits the bottom line a bit.
Auto retailers are also dealing with competition of their own. This can further hinder their situation as consumers continue to access more and more information, digitally, on their own. “They can be sitting in an F&I office working a deal and be on the phone working a deal with the dealer down the street,” said Manzi.
In the U.S. there are stair-step incentive programs for auto retailers. Many dealers today are striving to reach the stair-step numbers, which are designed to increase sales volume but can also hurt consumer loyalty. “It’s a very risky thing if they (dealers) are selling new cars,” said Manzi. He adds that margins are getting compressed simply because of competition between dealers (although used vehicles typically have a slightly better margin).
On the service and parts side, Manzi said this aspect of the business is always good as an increasing number of dealers are focusing in on their fixed ops departments. Dealers are starting to use more technologies that allow for speedier transitions and that help make the transaction easier for customers — a move that also bodes well for dealers.
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