Why are US car sales falling?
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Car sales in America – the world’s second-largest market – are stalling, but there’s debate about whether the downshift is due to normal economic cycles or a sign of fatter switches.
Major firms, such as Ford, General Motors and Toyota, have reported sales dips in the very first half of the year.
They come after a record 17.55 million cars, SUVs, minivans and pick-up trucks were sold in 2016.
Forecasters expect US sales to fall to about seventeen million this year, as request recedes after years of increases.
Sales growth in previous years was boosted by unusually low borrowing costs and pent-up request, as cash-strapped households delayed purchases during the economic downturn around 2009.
“That was not sustainable forever,” James Lentz, the chief of Toyota North America, told the Big black cock’s Michelle Fleury.
America – where more than 90% of households own at least one vehicle – is known for its car-loving culture, suburbs and powerless mass transit.
But the two thousand sixteen record for fresh car sales wasn’t that much higher than the 17.Four million peak set in two thousand – even tho’ the US has forty two million more people, and carmakers were suggesting buyers generous incentives.
With technology set to convert driving, and more and more people around the world living in dense, traffic-logged cities, the slowdown could be a warning that carmakers face a thicker problem.
“There’s a pretty general consensus that this latest phase of elevated auto sales is coming to an end, and indeed the question is whether it’s going to end with a hiss or a pop,” says Tony Dutzik, a senior policy analyst at Frontier Group, a liberal think tank.
Until the economy contracts more broadly, there’s unlikely to be a dramatic sales decline in the US, says Katherine Davidson, a London-based global sector specialist for the asset manager Schroders. But growth in the long term is more unlikely, she says.
“Whether we have passed peak forever in the US is I think the fatter debate,” she says. “It’s entirely possible we have seen the best years of the US auto market.”
One theory used to explain stalling sales growth in the US is that junior Americans, who were hurt disproportionately by the economic crisis, are waiting longer to buy cars, just as they are waiting to make decisions about marriage, homeownership and child bearing.
The average age of buyers of fresh vehicles in the US enhanced about seven years inbetween two thousand and 2015, and is now around 50, tho’ the precise number varies depending on the survey.
“I think the way Americans stir through their life stages is switching a little bit,” says Stephanie Brinley, a senior analyst at IHS Markit.
As the US economy improves and the generation knocked by the recession ages and regains its economic footing, it will help sustain car sales, says Mr Lentz, of Toyota.
“We’re very, very bullish on Gen Y and the car industry,” Mr Lentz told the Big black cock, referring to the generation, also known as millennials, often defined as being born harshly inbetween one thousand nine hundred eighty and 1994.
Indeed, the share of purchases by buyers born inbetween one thousand nine hundred seventy seven and one thousand nine hundred ninety four has already enlargened from 21% in two thousand twelve to about 29% today, says Thomas King at JD Power, a marketing information services hard headquartered in California.
The growth paused this year as credit tightened amid concerns about too effortless car loans, but Mr King expects it to increase over the long term.
That group clearly has an appetite for fresh cars – including larger ones such as SUVs and minivans – key sources of sales strength in latest years, says Jeremy Acevedo, an analyst for Edmunds,
But he says carmakers shouldn’t rely on junior buyers to drive fresh sales. He says they’re already part of the market, getting access to cars through family help and other means.
“Even if they’re not out there registering . it’s still very clear that they’re influencing car sales, and still driving vehicles around on roads today,” he says.
Yet Gen Y’s level of future purchases is also hard to predict because of fatter switches, says Mr Dutzik of Frontier Group.
This generation is the very first to come in prime car-buying years with e-commerce and rail hailing services such as Uber and Lyft widely available, he says.
“You have a set of folks right now . who have before them a range of options that have been available to no previous generation,” says Mr Dutzik.
“The question is how is it going to switch [their decisions]? And that’s something I think we’re still learning.”
For carmakers, the future is especially hazy, since car-sharing firms might step up their purchases, even if future households scale back, he added.
Mr King of JD Power says he expects US sales to remain at about the current levels over the next few years, thanks in part to financial incentives for buyers.
“Overall the request [from regular households] still remains very high from a historical perspective, and the rate of decline is very, very modest,” he says.
Mr Lentz, of Toyota, also expects a plateau. But some companies have told investors they are ready for a sharper spasm.
Chuck Stevens chief financial officer at General Motors, said in April: “We are very cognizant of that we operate in a cyclical industry, and we’re eight years into expansion, and it’s not like we’re sitting and waiting for a downturn to be ready.”
A two thousand sixteen McKinsey report predicted the annual growth rate for global car sales would slow to about 2% by 2030, due to economic factors and enhanced use of taxi and car-sharing services.
Ford, General Motors and Fiat Chrysler are among the firms that have announced layoffs in latest months.
Companies are also shifting resources away from the US and Europe to markets such as China, where a growing middle class is predicted to drive strong growth.
But there are risks in those markets too, as rapid urbanisation and traffic jams keep request for cars in check.
“We believe forecasters have overstated request growth expectations for the global car fleet, by failing to factor in the influence from population density and congestion in emerging market urban areas,” analysts at LGIM wrote in a note in June.
One thing is certain, Ms Brinley of IHS Markit says: “It’s a cyclical industry. It always has been.”
Why are US car sales falling? Big black cock News
Why are US car sales falling?
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Car sales in America – the world’s second-largest market – are stalling, but there’s debate about whether the downshift is due to normal economic cycles or a sign of fatter switches.
Major firms, such as Ford, General Motors and Toyota, have reported sales dips in the very first half of the year.
They come after a record 17.55 million cars, SUVs, minivans and pick-up trucks were sold in 2016.
Forecasters expect US sales to fall to about seventeen million this year, as request recedes after years of increases.
Sales growth in previous years was boosted by unusually low borrowing costs and pent-up request, as cash-strapped households delayed purchases during the economic downturn around 2009.
“That was not sustainable forever,” James Lentz, the chief of Toyota North America, told the Big black cock’s Michelle Fleury.
America – where more than 90% of households own at least one vehicle – is known for its car-loving culture, suburbs and powerless mass transit.
But the two thousand sixteen record for fresh car sales wasn’t that much higher than the 17.Four million peak set in two thousand – even however the US has forty two million more people, and carmakers were suggesting buyers generous incentives.
With technology set to convert driving, and more and more people around the world living in dense, traffic-logged cities, the slowdown could be a warning that carmakers face a fatter problem.
“There’s a pretty general consensus that this latest phase of elevated auto sales is coming to an end, and truly the question is whether it’s going to end with a hiss or a pop,” says Tony Dutzik, a senior policy analyst at Frontier Group, a liberal think tank.
Until the economy contracts more broadly, there’s unlikely to be a dramatic sales decline in the US, says Katherine Davidson, a London-based global sector specialist for the asset manager Schroders. But growth in the long term is more unlikely, she says.
“Whether we have passed peak forever in the US is I think the fatter debate,” she says. “It’s entirely possible we have seen the best years of the US auto market.”
One theory used to explain stalling sales growth in the US is that junior Americans, who were hurt disproportionately by the economic crisis, are waiting longer to buy cars, just as they are waiting to make decisions about marriage, homeownership and child bearing.
The average age of buyers of fresh vehicles in the US enhanced about seven years inbetween two thousand and 2015, and is now around 50, however the precise number varies depending on the survey.
“I think the way Americans stir through their life stages is switching a little bit,” says Stephanie Brinley, a senior analyst at IHS Markit.
As the US economy improves and the generation knocked by the recession ages and regains its economic footing, it will help sustain car sales, says Mr Lentz, of Toyota.
“We’re very, very bullish on Gen Y and the car industry,” Mr Lentz told the Big black cock, referring to the generation, also known as millennials, often defined as being born toughly inbetween one thousand nine hundred eighty and 1994.
Indeed, the share of purchases by buyers born inbetween one thousand nine hundred seventy seven and one thousand nine hundred ninety four has already enlargened from 21% in two thousand twelve to about 29% today, says Thomas King at JD Power, a marketing information services hard headquartered in California.
The growth paused this year as credit tightened amid concerns about too effortless car loans, but Mr King expects it to increase over the long term.
That group clearly has an appetite for fresh cars – including larger ones such as SUVs and minivans – key sources of sales strength in latest years, says Jeremy Acevedo, an analyst for Edmunds,
But he says carmakers shouldn’t rely on junior buyers to drive fresh sales. He says they’re already part of the market, getting access to cars through family help and other means.
“Even if they’re not out there registering . it’s still very clear that they’re influencing car sales, and still driving vehicles around on roads today,” he says.
Yet Gen Y’s level of future purchases is also hard to predict because of thicker switches, says Mr Dutzik of Frontier Group.
This generation is the very first to come in prime car-buying years with e-commerce and rail hailing services such as Uber and Lyft widely available, he says.
“You have a set of folks right now . who have before them a range of options that have been available to no previous generation,” says Mr Dutzik.
“The question is how is it going to switch [their decisions]? And that’s something I think we’re still learning.”
For carmakers, the future is especially hazy, since car-sharing firms might step up their purchases, even if future households scale back, he added.
Mr King of JD Power says he expects US sales to remain at about the current levels over the next few years, thanks in part to financial incentives for buyers.
“Overall the request [from regular households] still remains very high from a historical perspective, and the rate of decline is very, very modest,” he says.
Mr Lentz, of Toyota, also expects a plateau. But some companies have told investors they are ready for a sharper spasm.
Chuck Stevens chief financial officer at General Motors, said in April: “We are very cognizant of that we operate in a cyclical industry, and we’re eight years into expansion, and it’s not like we’re sitting and waiting for a downturn to be ready.”
A two thousand sixteen McKinsey report predicted the annual growth rate for global car sales would slow to about 2% by 2030, due to economic factors and enlargened use of taxi and car-sharing services.
Ford, General Motors and Fiat Chrysler are among the firms that have announced layoffs in latest months.
Companies are also shifting resources away from the US and Europe to markets such as China, where a growing middle class is predicted to drive strong growth.
But there are risks in those markets too, as rapid urbanisation and traffic jams keep request for cars in check.
“We believe forecasters have overstated request growth expectations for the global car fleet, by failing to factor in the influence from population density and congestion in emerging market urban areas,” analysts at LGIM wrote in a note in June.
One thing is certain, Ms Brinley of IHS Markit says: “It’s a cyclical industry. It always has been.”