Jan. auto sales slow after strong 2016

DETROIT (Jan. 27, 2017) — U.S. new-vehicle sales, coming off the industry's strongest December in history, are starting 2017 with only a slight slowdown, according to four forecasts issued this week. One analyst said there already are increasing signs that 2017 could be a third consecutive year of record demand.

The forecasts show sales declining by no more than 3 percent in January and call for a seasonally adjusted, annualized selling rate of 17.3 million to 17.7 million units, compared with 18.4 million last month and 17.6 million in January 2016.

"January had the potential of being a very slow month at dealerships, given the fact that auto sales shattered records in December," said Jessica Caldwell, executive director of industry analysis for Edmunds.

"But January is shaping up to be a surprisingly healthy month. The economy continues to show signs of strength and consumers are feeling confident, boosting auto sales above initial expectations."

January has been the weakest month in each of the past eight years. This January has seen few big snowstorms to keep car shoppers at home and rising equity markets to give consumers the confidence needed for a big purchase. The Dow Jones Industrial Average closed above 20,000 points for the first time ever this week.

Although the general consensus among analysts and auto makers has been that demand would recede slightly this year after a record 17.54 million in 2016, LMC Automotive now says the market might not have peaked after all.

Jeff Schuster, LMC's senior vice president of forecasting, said he expects U.S. sales to rise 0.1 percent to 17.6 million. Retail sales are projected to be flat at 14.1 million, meaning the overall gain would be driven by a modest increase in deliveries to businesses and other fleet buyers.

"After an overheated close to 2016 and the increased likelihood of deregulation and fiscal stimulus from the Trump administration driving the economy higher," Mr. Schuster said in a statement, "we now expect 2017 to be another record year in U.S. auto sales, though there is a lot of runway before the year is complete. While there are many variables to consider this year, one area of caution is the large number of lease maturities repopulating the used-car market."

Light trucks, which accounted for a record 60.7 percent of the U.S. market in 2016, continue to gain steam. Trucks represented 63.3 percent of sales in the first 16 selling days of January, according to J.D. Power, which partners with LMC to forecast sales.

Incentive spending in the first part of the month dropped 9.7 percent to an average of $3,614 per vehicle, J.D. Power said. Rising incentives, particularly on pickups and SUVs, were a major factor in the industry's frenzied end to 2016.

Analysts with Kelley Blue Book (KBB) said even more discounting would be necessary to hit another record this year. It's projecting full-year sales of 16.8 million to 17.3 million.

ALG's chief analyst, Eric Lyman, said additional incentives toward the end of this month helped stoke sales after "a slow start in January." ALG estimates that January incentives will rise 22 percent to $3,635 over January 2016.

American Honda and Subaru are expected to post sales gains in January, while Fiat Chrysler Automobiles is projected to report a double-digit drop. The forecasts show a small decline for Ford Motor Co. and a mixed outlook for General Motors, Toyota Motor Sales U.S.A. and Nissan North America.

The biggest gain of the month is expected to come from Volkswagen Group of America, which has struggled since having to halt sales of its diesel vehicles after being caught cheating on emissions tests. January could mark the third consecutive month in which VW's U.S. sales increase at least 16 percent.

"With multiple new products on the market and looking to put the diesel scandal in the past, Volkswagen Group should report large year-over-year increases, and start to gain back market share," said KBB senior analyst Alec Gutierrez.

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Nick Bunkley is a reporter with Automotive News, a Detroit-based sister publication of Tire Business.