The current picture of the auto industry looks like this: the highest levels of unsold vehicles since the recession and a slow sales growth in the past five months, writes Nick Bunkley in Automotive News.
As a result, bigger discounts and lower profit margins throughout 2014 may be in store for the auto dealers.
Put in numbers, new-vehicle sales have been up only 2 % since Labor Day, compared to a 10 % rise in the 12 months prior. January sales declined 3 % and the selling rate, and the seasonally adjusted annualized selling rate fell to 15.2 million, the lowest since last April.
A big role in this tendency played the polar vortex with the snowstorms and subzero temperatures that didn’t put potential buyers in the mood for shopping. Nevertheless, auto makers and dealers hope that the upcoming months will bring in more business as the weather improves.
Bunkley also quotes the Morgan Stanley analyst Adam Jonas who sees troublesome sings for the auto industry beyond the bad weather. Jonas points out that after four years of steady increase, the sales pace “appears to have stalled.”
“The industry stands at a crossroads,” Jonas said. “We really think the best of the U.S. auto replacement cycle is over. The incremental buyer is moving from someone who needs to replace their car to one who just wants to, making financial willingness to lend and credit availability more important than ever.”