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Uncertainty looms over U.S. auto sales momentum

Cox Automotive projects sales growth to slow in the next six months to 15.7 million units,

U.S. auto sales through the first half of the year are up by 2.9% compared to a year ago. However, concerns loom about whether the industry can sustain this momentum through year-end.

According to Cox Automotive, vehicle inventory levels are growing, incentives are increasing, and there’s rising uncertainty surrounding the economy, interest rates, and the upcoming U.S. presidential election. The auto data and research firm projects sales growth to slow in the next six months to 15.7 million units, roughly a 1.3% increase from 2023. Unlike in recent years, growth has come from commercial sales rather than more profitable consumer sales.

“Overall, we’re expecting some weakness in the coming few months,” said Cox chief economist Jonathan Smoke during a midyear review briefing Tuesday. “We are making assumptions that we can’t quite hold the pace we’ve been seeing. But we’re not expecting a collapse either.”

These conditions favor consumers who have been waiting to purchase new vehicles amid unprecedented supply shortages and high prices during the COVID-19 pandemic. However, they pose a challenge for automakers, many of which posted record profits due to high demand and low availability of new vehicles during the pandemic. Additionally, Wall Street has been predicting challenges in vehicle pricing and profitability for most automakers compared to recent record levels.

“There’s a lot of uncertainty that lies ahead, and it may make recent sales successes hard to build upon,” said Cox’s senior economist, Charlie Chesbrough. He expressed concern that the year’s second half may not maintain the growth seen so far.

Rental, commercial, and leasing sales are showing signs of double-digit growth, while Cox expects the retail share of the overall industry to decrease by nine percentage points from 2021 to approximately 79%.

Cox expects General Motors, Toyota, and Honda to be the sales “winners” for the first half of the year. If Toyota maintains its growth, it could challenge GM to rank as the top-selling automaker in the U.S., a title it held for the first time in 2021.

On the other hand, Tesla and Stellantis are underperforming, with sales estimated to be down 14.3% and 16.5%, respectively, through June. Honda surpassed Stellantis in U.S. sales during the first half, pushing the parent company of Chrysler and Jeep to No. 6 in sales, down from its recent No. 4 rank. Stellantis CEO Carlos Tavares mentioned that the company is correcting “arrogant” mistakes in its U.S. operations that led to sales declines, bloated inventories, and investor concerns.

Jonathan Smoke highlighted that higher supply marks the end of the seller’s market that has defined the last four years, leading to further deterioration in new vehicle grosses and dealer profitability.

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