US Auto Sales Begin to Falter in January as Industry Faces Struggles

[cnxvideo id=”625456″ placement=”ros”]The auto industry cannot sell 17 million cars and light trucks in America year after year. At some point buyer demand will become sated. Higher interest rates will force manufacturers to offer less attractive deals. Thus, sales would begin to drop from their recent peak, which will create a set of difficult challenges for car companies that operate in the United States. A forecast for January sales predicts a dip of 3% to 1.13 million, which translates into 31,000 vehicles. Some car companies will start to be part of trends that may erode their earnings.

Kelley Blue Book (KBB) predicts the drop will be extremely uneven among manufacturers. Volkswagen, which also owns the Audi and Porsche brands, will begin to rebound sharply from a sales collapse brought on by a diesel engine cheating scandal. KBB forecasts its sales will rise 17% to 42,500. However, this will still make Volkswagen a tiny participant in the American market, second only to China in size, with a 3.1% share — smaller than any other large global manufacturer. Volkswagen trades places from year to year with Toyota Motor Corp. (NYSE: TM) as the world’s largest manufacturer.

The biggest loser of January is expected to be Fiat Chrysler Automobiles N.V. (NYSE: FCAU), which has been plagued by its own engine scandal. Its sales, which include the Jeep, Fiat, Chrysler, Dodge and Ram brands, are forecast to fall 14.2% to 147,000. This would drop its market share from 14.8% last year to 13.0% in the current month.

Market leader General Motors Co. (NYSE: GM), which owns the Buick, Chrysler, Cadillac and GMC brands, is expected to have a difficult month with a sales drop of 4.3% to 195,000. Second place Ford Motor Co. (NYSE: F), which owns the Ford and Lincoln brands, is expect to have sales click down 2.0% to 169,000. That will put it very slightly behind Toyota, which is expected to experience a drop of 0.8% to 160,000. Toyota owns the Toyota, Lexus and Scion brands.

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Sport utility vehicles (SUVs) and crossovers, the sales of which have dominated the industry in recent years, will continue to do so, according to KBB:

Quietly growing in the second half of 2016, mid-size SUVs/crossovers look to be the second highest volume segment in January 2017, buoyed largely by strong demand for utilities. Consumers who may have previously considered a large sedan or minivan are instead buying mid-size utilities for roughly the same price.

Compact SUV/crossover, the top segment in the industry, is expected to decline slightly in January, but still grow its share of overall sales. In 2017, the Toyota RAV4 and Honda CR-V could unseat the Toyota Camry and Honda Civic to be the highest-selling vehicles in the industry, pickups excluded, which would be appropriately representative of the general trend of consumers shifting from cars to SUVs.

The high sales rate in the United States has helped to drive car company earnings higher. Now, they have the challenge of a market that will make it more difficult to keep those numbers in line.

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