This time of the year isn’t a surprising time at all for car sales to slow. Typically the last few months before the new model year begins, which is normally in September and October, car sales slow due to excitement over the new model year, fewer models being offered on the lots at dealerships and the inability to order models that are part of the current model year with the features desired. While this is something the automotive industry has faced nearly every year, there is something different happening this year.
Over the past five months, the sales of new vehicles in the US has dropped. The record-setting 17.8 million numbers from last year is certainly a thing of the past. As of the end of July, the pace of sales in the US is at 16.73 million new vehicles, which is a significant drop. This may be a sign that we have seen the end of the record sales and will begin to see a leveling off of sales in the US. This five-month trend has caused some automakers to turn to alternative methods of supporting the sales needed to avoid factory shutdowns.
In order to avoid the potential of shutting down factories, many automakers are cutting some of their low-margin sales models and turning them into fleet rental vehicles to aid in the continued flow of income. This certainly is one way to assist in continuing the income flow, but another way to avoid some of the challenges that faced the automakers nearly a decade ago is the flexibility built into the labor agreements that are in place with the Detroit automakers. These agreements allow production changes which can aid in avoiding the need to have a complete factory shutdown in any area.
After setting records for sales two years in a row, slower sales were certainly anticipated at some point in the future. Right now the large pickups have dropped off four percent, the large SUVs have lost twenty percent, and only the F-Series models from Ford have seen an increase which is a six percent increase right now. The overall sales for Ford have dropped 7.5 percent and FCA lost 10 percent of the sales compared to July of last year. The sales drop for the Japanese automakers in the US isn’t much better with only Toyota showing an increase over last year.
Have we seen the end of the record sales that have been part of the automotive market for the past two years? It’s possible that sales in the second half of this year will increase and we will see another record-setting year, but most likely we’re getting ready for the slowdown in sales of new models in the automotive industry. This could signal a lowering of prices and even more incentives that could be offered in the future. Of course, these slower sales could simply be a small lull in the market and we may see sales pick back up and have a record-setting year for the 2018 model year if we don’t see a turn-around in sales for 2017.
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