The first half of the year has seen a 2.9% increase in U.S. auto sales compared to the previous year. However, there are growing concerns about whether this momentum can be sustained for the remainder of the year. Inventory levels are rising, incentives are going up, and there is uncertainty surrounding the economy, interest rates, and the upcoming U.S. presidential election. As a result, Cox Automotive predicts that sales growth will slow down in the next six months to 15.7 million units, representing a modest 1.3% increase from 2023. Interestingly, the growth is now being driven more by commercial sales rather than consumer sales, which could have implications for the overall health of the industry.
While the current market conditions may benefit consumers who have been waiting to purchase a new vehicle, they pose a significant challenge for automakers. Many companies enjoyed record profits in recent years due to high demand and limited supply during the pandemic. However, Wall Street analysts are now predicting tougher times ahead, with concerns about pricing and profitability. The second half of the year is expected to be particularly challenging for automakers, as maintaining the growth experienced so far may prove to be difficult.
According to Cox Automotive, rental, commercial, and leasing segments are showing signs of double-digit growth, while retail sales are expected to decline by nine percentage points compared to 2021, accounting for roughly 79% of the overall industry. The “winners” in terms of sales for the first half of the year are projected to be General Motors, Toyota Motor, and Honda Motor. Toyota, in particular, has the potential to challenge GM for the top-selling automaker in the U.S. once again. On the other hand, companies like Tesla and Stellantis are expected to underperform, with sales declining by 14.3% and 16.5%, respectively, through June. Stellantis CEO Carlos Tavares has acknowledged mistakes that led to sales declines and is working to address them to improve the company’s performance in the U.S. market.
The increase in vehicle supply marks the end of the “seller’s market” that characterized the industry in recent years. This shift is expected to result in lower new vehicle grosses and decreased dealer profitability. As the market adapts to these changing dynamics, automakers will need to rethink their strategies to remain competitive and navigate the challenges posed by the evolving landscape. The coming months will test the resilience of the auto industry and require companies to be agile in responding to shifting consumer preferences and market conditions.