March is 2019’s first indicator that the tide is changing regarding automotive sales trends. Marketing research firm, J.D. Power revealed that first-quarter sales for this year would likely be the lowest they have been since 2014. In fact, the entire year may be the first since 2014 to have total automotive sales under 17 million, with an estimated final total of 16.69 million vehicles.
March is a significant piece in this first quarter puzzle. For the month, retail sales are estimated to be the lowest since 2013. However, while March may bring abysmal numbers, there a bit is more to the story that could have a more profound impact on the rest of the year. What trends have defined March’s numbers, and how could they affect the rest of 2019? Read on for the factors that potentially impacted March’s automotive sales numbers.
Sales may be Down, But Higher Priced Vehicles are Filling the Gap
While consumers are buying fewer cars, the types of vehicles they are purchasing are higher priced. According to JD Power, 48 percent of the cars purchased in the first quarter of the year were SUVs. These vehicles—along with crossovers—are typically higher priced when compared to sedans. Also, cars, in general, are becoming more expensive, as the average transaction prices are 2.8 percent more expensive than the same time last year. So, sales may be down, but automakers and dealers are doing more with less since high new car prices are making up for the sales slump.
Discounts and Incentives Continue to Shrink
For the average car buyer, affordability is becoming a more significant concern. According to TrueCar’s ALG Unit, car companies on average reduced discounts by $191 when compared to the same time last year. Also, the average retail incentive was $3,821 per unit, a three percent decrease from last year’s numbers.
In addition to this information, many individuals utilize tax refunds as a down payment for a car. Unfortunately, this narrative is not holding up this year, as low tax refunds are impacting the numbers of customers that have the money to go toward the purchase of a new vehicle. So, overall, car buyers are definitely feeling the strain.
The Rise of the Used Vehicle
The average new vehicle transaction price for this past month is $34,213, and consumers are beginning to notice the staggering price increases and the pricing differences between used cars and new vehicles.
In what is likely a response to this trend, used car sales at franchised auto dealer showrooms rose 5.3 percent when compared to the same time last year. Also, recent used car models are specifically resonating with customers. As transaction prices continue to rise, and discounts on new vehicles fall, it is more than likely that we could begin to see used cars becoming more of a significant player in the automotive sales market.
Potentially Game-Changing Events are Likely to Shake Consumer Confidence
Cox and many of the other analysts are predicting that all automakers will experience a slump this month. Fiat Chrysler, Toyota, Honda, and Nissan will likely see decreases in their sales. However, one of the most shocking turns of events is that Subaru could also experience an uncharacteristic drop. Subaru has seen year-over-year increases for the past seven years, and March could spell the first significant dip for the manufacturer.
Since their success has been so steady, a change such as this could signify an overall shift in the industry. Overall, the rest of the year is set to potentially bring about more tariffs, an unsteady stock market, and the beginnings of an economic slowdown which are all events that could continue to shake consumer confidence.
March is not an emergency, but it is a time for automakers and dealers alike to begin to plan for a potential downturn in automotive sales. As conveyed above, it is likely that new car sales will continue to drop, and those that can afford to purchase cars may start to embrace smaller and more affordable vehicles once again. Also, used cars will make more of an impact on the industry, as budget-conscious buyers will seek to find even cheaper cars. If January was an indicator of what was to come, March is where the predictions are coming to fruition.