Can Q4 Boost Auto Sales to 2016 Record Numbers?

auto sales

2017’s auto sales have been a wild card compared to the previous two years. 2015 and 2016 ended on high notes with over 17 million units sold. Ultimately, 2016 became a record-setting year for auto industry sales. At this point last year, units sold were well over 14 million, and November and December sealed the deal with 1,378,635 and 1,688,368 units sold respectively. Currently, October saw 230,000 fewer units sold than October 2016.

There has been a noticeable slump in 2017 as the only month that has seen growth was in September. For 2017 to be on par with 2016 and attempt to approach their end of year numbers, November and December would have to put up an impressive showing. Here are the trends that will likely affect the end of 2017.

A Year Intended to Compliment 2016

The magic number for this year was 17.1 million units, a prediction made in June by Steven Szakaly, chief economist for the National Automobile Dealers Association. We were well into the first half of the year, and analysts finally had a chance to see where the industry was trending. Even though the previous five months saw a decline, many were still hopeful that sales numbers would end over 17 million. The most significant reason was the hope that automakers could turn around a substantial amount of inventory still sitting on dealer lots. There was a lot to sell, and with rising incentives on sedans and less popular brands, there was a lot of opportunities to meet the demands of consumers who were searching for a vehicle.

The Imbalance of Sports-Utility Vehicles and Crossovers

2017 has been the year of the larger vehicle. A trend many may not have seen coming. During the years of the Great Recession, many people gave up SUVs because of the rise in gas prices. Automakers took note of this issue and created the crossover. Smaller and more fuel-efficient cars that still had more room than their mid-sized sedan counterparts. In October alone, trucks and SUVs accounted for 65 percent of auto sales in October. This trend will likely continue into the end of the year as automakers increase year-end discounts. However, is this enough to boost overall inventory for the year?

A Response to Automakers Doing Too Good of a Job?

If 2017 has been the year of the SUV and crossover, then the overall theme has been technology. Car prices rose to their highest ever for an October sales period at $32,185. Prices have gradually risen over the past couple of years due to the amount of technology and other custom bells and whistles consumers prefer in their vehicles. As a result, car buyers have taken out loans over more extended periods of time to afford more expensive models. While this is great for total revenue, this also decreases the number of people who will be in the market for a new car. This coupled with the fact that people are holding onto their older cars longer shrinks the number of potential car buyers going into the end of this year.

The Story of December

If the story of last year was the sales boost due to trucks and SUVs, then the end of 2017 depends upon smaller vehicle inventory and incentives. Labor Day was a precursor and potential model for how December could shape up. Labor Day was responsible for a considerable sales increase in September 2017. Automakers increased sales incentives at higher levels than the previous year to clear out high amounts of inventory manufacturers were still holding onto. However, sales for Labor Day were still down four percent compared with last year, so automakers still have inventory to push at the close of 2017.

The question is if there are enough car buyers to boost 2017 to at least be on par with 2016? For years, analysts expected an overall decline in auto sales, but some projected it would occur in 2016. Some are starting to feel 2017 may be the year that sets a new structural trend of shrinking auto sales due to people holding onto their cars longer, waiting for later models with the latest technology, and more prolonged loan contracts. Even if November and December each experienced only a one percent decline compared to last year, total units sold would barely approach 17 million units. Automakers hope the end of year deals and a late inventory push will put them closer to that critical number, but if current trends stand then, this seems unlikely.