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NADA: April Auto Sales Continue to Lead Economic Growth

MCLEAN, Va. — Falling gasoline prices and continued pent-up demand have spurred spending on new cars and light trucks, with average retail transaction prices rising more than 3% in the first quarter compared to the same period a year ago, the National Automobile Dealers Association (NADA) reported this week.

The average retail transaction price for a new vehicle was $33,189 through the first quarter.

“Consumers clearly feel confident enough in the economic recovery to make big-ticket purchases,” said NADA Chief Economist Steven Szakaly. “While we’ve seen a pullback in investments in other industries, particularly in oil-related industries, automotive retailing remains a growth industry.”

The NADA has forecasted sales of 16.94 million new-light vehicles for 2015.

“The automotive-retailing sector is continuing to outpace growth in the overall U.S. economy,” Szakaly added. “Economic and employment growth were slower than expected in the first quarter but vehicle sales remain strong.”

The strong summer selling season and the allure of new-vehicle models will likely keep sales humming, despite an expected gradual rise in gasoline prices by about 11% over the next eight months of the year, according to the NADA. This year, the light-truck segment, which includes SUVs, CUVs, minivans and pickup trucks, is expected to outsell cars by 56% to 44%, respectively.

The Fed is expected to delay an interest rate increase, but Szakaly said he believe any increase will likely be small. The NADA now forecasts the Fed to raise rates by just 25 basis points in the fall and 35 basis points by the end of 2015.

“The historically strong spring and summer selling seasons will be driven by new and redesigned vehicles as well as competitive financing rates, which bode well for auto sales over the next several months,” Szakaly added.

Szakaly added that strong consumer demand in the used-vehicle market is keeping trade-in values high, which is another value for car buyers.

“Just like the new-vehicle market, we continue to see healthy demand for used cars,” he said. “Those same factors in the new-vehicle market, which include low financing rates, extra spending money and improving employment opportunities, are driving car buyers to the used-vehicle market as well.”

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NADA Keeps U.S. New Car Sales Forecast at 16.94 Million

The National Automobile Dealers Association Monday reaffirmed its outlook for U.S. auto industry sales to rise 3.1 percent to 16.94 million this year, despite slightly negative gross domestic product impact early this year because of bad weather and West coast port strikes, reported The Detroit News.

NADA Chief Economist Steven Szakaly, in a call with reporters, said he expects U.S. auto sales in March to hit the seasonally adjusted annual rate of 16.9 million. Sales were strong in January and February and automakers will release March sales figures on Wednesday.

“We still think this is a very positive market,” he said, adding light vehicle sales will outpace overall economic growth for the sixth year.

Szakaly said he doesn’t expect the Federal Reserve to boost interest rates until September, which will be good for “motor vehicle sales throughout the very important summer selling period.”

Szakaly said U.S. wage and income growth of at least 1.5 percent to 2 percent will be critical for continued growth in new car sales. Without it, he said, there could be negative impacts to car sales late in 2015 and in early 2016.

NADA expects light truck sales to represent 56 percent of the U.S. market this year, a few percentage points higher than last year, mostly due to lower gasoline prices, Szakaly said. He said there’s been a “tremendous boom for light trucks,” though small and midsize car sales have suffered somewhat the past few months as consumers have shifted preferences to crossovers, SUVs and trucks.

“(We have) seen the market for hybrids and electric vehicles also take a slight hit over … the last few months,” he said.

The used car market also has been strong this year, with used car prices up 3.7 percent since December, said Jonathan Banks, executive analyst for NADA Used Car Guide.

Analysts including those at NADA predict used car inventory will reach pre-recession levels by 2017, as consumers increasingly trade in leased vehicles. The high inventory level and a slowdown in growth of new car sales could cause used car prices to drop.

“We’re going to see some moderation in used car prices, but we think it’s going to be slow,” Banks said.

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IHS Forecasts 88.6 Million Global Light-Vehicle Sales in 2015

SOUTHFIELD, Mich. — With 2015 off to a good start, IHS Automotive, part of IHS Inc., forecasts global automotive sales for 2015 to reach 88.6 million, an increase of 2.4% over 2014, continuing an unbroken five-year run of sales recovery and growth from the low point set in the depth of the Great Recession in 2009. However, a slowdown is being signaled with just two of the high-potential BRIC markets likely to see increased sales this year.

China will lead the sector’s volume growth, though IHS expects the market to slow from 2014. The North American market will continue its upswing, though the pace differs by country. The size of the contraction of the Russian car market remains a significant wild card that will impact the European market throughout the year, according to the analysis, while other countries in the region continue to recover at a rate of 2.5% to 3%, helped by the European Central Bank’s (ECB) commitment to full-blown Quantitative Easing (QE).

For the APAC region in 2015, China’s economic growth will decelerate further, to 6.5% from 7.4% in 2014, as a result of industrial overcapacity and weakness in the real estate sector. However, IHS Automotive analysts still expect light vehicles sales in China to grow by 7% in 2015 to 25.2 million units, aided with increased auto finance penetration, fast dealership expansion and government vehicle scrappage programs.

According to the analysis, the current anti-trust campaign environment could alter the relationships among consumers, dealers and OEMs. The campaign is expected to have a long-lasting effect on premium parts/vehicle prices in China. Coupled with this, the momentum could lead to downward adjustment in premium pricing, which helps provide solid foundation for premium vehicle penetration to further increase in China in the next decade. IHS expects premium vehicles in China to top two million units in 2015 with year-over-year growth of 15%.

IHS Automotive experts also expect SUVs to remain the fastest-growing segment in China in 2015. “We see SUV market share (as percent of passenger vehicle sales) to increase from 26% in 2014 to 28% in 2015 as consumers look to this segment to address evolving transportation needs,” said Lin Huaibin, manager, China light vehicle sales forecast, IHS Automotive.

In India, falling inflation, lower interest rates, energy prices and regained confidence will help lift the car market into growth mode starting in 2015 after a two-year lull.

North America continues to be an impetus to global light vehicle demand levels. Improving credit conditions throughout the region and sustained, but tenuous economic growth among the countries in the region have helped to motivate total auto sales levels.

“Although the economic conditions and pace of recovery differ slightly among the North American countries, consumer confidence, credit availability and pent-up demand have played key roles in sustaining auto demand momentum since the Great Recession,” said Chris Hopson, manager, North American light vehicle sales forecasting, for IHS Automotive. “This should help motivate sales once again in 2015.”

IHS Automotive projects regional light vehicle sales volume in North America to hit more than 20 million units in 2015, up 2.5% from last year.

In the United States, IHS Automotive analysts continue to believe the upside risks for auto demand are more apparent than the downside risks. With a strong exit to 2014, and gasoline prices currently plunging, consumers may feel even more positive throughout 2015. The IHS Automotive U.S. light vehicle sales forecast for 2015 is 16.9 million units.

Light vehicle sales in Canada set an annual record in 2014 that is scheduled to be broken once again in 2015. Light truck sales, especially CUVs, helped motivate demand levels last year and with lower fuel prices expected, should once again dominate growth in 2015. The Canadian light vehicle sales forecast from IHS Automotive for 2015 stands at 1.88 million units.

In Mexico, auto sales stalled through the first seven months of 2014, causing some concern that new tax policies implemented at the beginning of 2014 were hurting auto demand growth; however, motivated by incentives to help spark demand, light vehicle sales grew throughout the second half of the year. This momentum should continue in 2015, and IHS projects sales volume to grow 3% to 1.17 million units.

There was a stark change in 2014 South America automotive demand compared to 2013, when monthly sales broke the 500,000 unit mark seven times. The year preliminarily closed with 5.34 million units — a 10% drop from 2013; with politics impairing Argentina and Venezuela, and the economic climate weighing down markets like Brazil, Chile and Peru, where it may take a few years for demand to recover to previous highs.

Uncertainty lingers over Argentina, Brazil, Chile and Venezuela for 2015. Argentina is displaying hints of the “tango crisis” of 1998: uncontrolled inflation, lack of foreign currency and risk of devaluation. As a result, IHS Automotive is expecting 2015 sales in Argentina of roughly 500,000 units. In Brazil, banks have been tightening credit for the last three years, and they are not showing interest in boosting credit to the automotive sector. This, along with the increase in the IPI (an industry tax) in early January, higher financing rates and weak job generation should translate into sales in Brazil of 3.25 million units.

In Chile, doubt over car sales is drawn from the emissions tax and the risk of further currency devaluations will ring in the market close to the 300,000 unit mark. Finally, it is difficult to imagine the Venezuelan market tumbling any lower than it already has; however, as oil prices plummet, the government’s access to foreign currency will continue to be limited, thus impairing vehicle production.

In Europe, the crisis in Russia could offset the boon of lower fuel prices for Europe’s car buyers and even the new QE boost from the ECB. As the Russian economy slumps into a deep recession in 2015, its negative impact on the Eurozone and surrounding countries could be large enough to offset the consumer benefit from falling fuel prices. Overall, the IHS forecast for light vehicle sales in Western Europe has only been fractionally upgraded for 2015 despite the benefits of $60 oil.

After a better-than-expected 5% increase in 2014, light vehicle sales in the mature West European region are forecast to improve by another 3% in 2015, with upside coming if the apparent open-ended commitment to QE by the ECB pushes the Euro down still further.

“The size of the market contraction in Russia is the biggest wild card facing vehicle manufacturers across the European continent, if not the world, in 2015 and 2016,” said Nigel Griffiths, chief automotive economist, IHS Automotive.

After the recent enormous volatility of the Russian currency, prices of imported cars look like they will increase well over 20% or so and even domestically-produced vehicles will have to see double-digit price hikes. This, along with a deep recession compounded by the recent credit rating downgrades, could push the market down to just 1.8 million units; a 27% decline over 2014 and nearly 40% (1.2 million) below the market level recorded in 2012.

From a global perspective, the auto industry is now being faced with and will have to adjust to very large and widespread exchange rate movements, commodity and raw material price changes and, of course, the new low oil prices. The last two will be significant tailwinds for the auto sector, its margins and for most of the world consumers, but at the same time, their unpredictability will mean long-term business plans will likely change at a more cautious pace.

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New-Car Sales to Reach 13.9 Million, NADA’s Taylor Predicts

LAS VEGAS — Paul Taylor, chief economist of the National Automobile Dealers Association, said 2012 will be another rebuilding year for the industry, and predicts sales will reach 13.945 million units this year.

Fulfillment of that forecast mark the third consecutive year of rising new-vehicle sales. In 2009, the auto industry sold 10.4 million new cars and trucks, down from 13.2 million units in 2008. In 2010, sales grew to 11.55 million and rose to 12.7 million last year, according to F&I and Showroom magazine. Taylor, however, said the industry is still a ways away from the 16-17 million-unit years realized between 2000 and 2007.

“Those figures were not obtained during normal sales conditions,” Taylor said during his annual press briefing at the NADA Convention and Expo in Las Vegas. “Recent sales are what we would expect from a normal growing economy coming back from recession.”

Taylor listed better credit conditions and more generous manufacturer incentives as reasons for his positive outlook for 2012. He also said the production problems caused by the Japanese earthquake and flooding in Thailand are also behind the industry, which also fueled his prediction.

“With the age of cars and trucks on the road today at an average 11.1 years, many consumers feel they can no longer delay making a purchase of a new or newer vehicle,” said Taylor, whose top five reasons for his optimism were pent-up consumer demand, a return to stabilized credit, an influx of options, gasoline prices and home prices.

New model releases, which have caught the eyes of consumers, are another reason for his optimism.

“Consumers want new cars and light trucks,” Taylor said. “We can see that in strong auto show attendance and sales numbers for January.”

The numbers also show that one- to five-year-old used vehicles are in short supply and selling at higher-than-usual prices. That has resulted in more consumers seeking out new-car purchases.

“Interest rates on new-car loans will remain historically low in 2012 and 2013, due in part to policy decisions by the Federal Reserve Board to keep rates low and the U.S. economy growing,” Taylor said. “As a result, affordable credit will be widely available in with more automaker finance companies offering low-interest and interest-free loans for up to 60 months.”

General Motors, Ford, Chrysler and Volkswagen, heartened by the boost in consumer confidence, have been quick to launch new products that compete with those offered by other automakers. The excitement over styling, fuel efficiency and other options has driven more consumers to the showrooms, Taylor pointed out.

“The interest in new cars also reflects the lack of used cars with low mileage,” Taylor said. “During the recession, five million cars didn’t come into the marketplace as trade-ins.”

Gasoline prices also could hurt or help sales in 2012. In 2011, gasoline prices averaged $3.51, up 72 cents per gallon from 2010’s average, according to industry sources. This year, analysts predict another boost in prices that could bring gasoline prices to $4.13 a gallon. Taylor, however, said better weather conditions this winter offers some hope that prices won’t rise too high this year. If they do, however, Taylor expects consumers to once again turn to fuel-efficient vehicles.

“Many consumers think if they’re going to buy SUVs or other light duty trucks, they had better do it now, with gas reasonably affordable,” said Taylor, who noted that future fuel-related regulations could also prod consumers to buy those vehicles now.

Although real estate prices and values are still falling in some states, Taylor said home prices appears to be stabilizing overall. This should help to boost consumer confidence this year, he said.

“Stabilizing home prices will support stronger car and light truck sales over this year,” Taylor said.

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Edmunds.com Predicts 13.6 Million-Unit Year for 2012

SANTA MONICA — A sales forecast by Edmunds.com indicated that an estimated 13.6 million new cars and trucks will be sold in 2012. The website’s forecast anticipates a solid increase over 2011 new-car sales, which could come in as high as 12.8 million vehicles when December comes to a close.

“With annual sales still far below the level achieved prior to the last recession, there’s plenty of indication that pent-up demand is far from spent,” said Lacey Plache, Edmunds.com chief economist. “Improved selection and loosening credit conditions are helping to entice the millions of buyers that are waiting to jump back into the market.”

From January until April, the industry will see the tail end of the current “mini-bubble” of auto sales generated by car buyers who steered away from high prices and poor selection at dealer lots last summer following the Japanese earthquake, according to Edmunds.com. Of those months, sales are likely to peak in March, a popular car-buying month.

At that point, seasonal factors will resume as a key influence on sales in 2012, resulting in more volatile sales on a monthly basis as opposed to the flat line monthly sales that were seen this year from May through November, according to Edmunds.com. Next summer’s sales will be influenced in May by graduation-related purchases and again in August by the summer sell-down of current year models. Popular year-end sales events also should continue to keep the recent trend of strong November and December sales performances well intact.

The continued slow pace of the economic recovery and uncertainty in the months leading up to the U.S. presidential election may constrain sales growth, Plache added. Threats of a European recession and a Chinese economic slowdown also will pose a risk to growth in the auto market. And if these or other negative events shake the marketplace, new vehicle sales momentum could weaken.

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