Cold, shutdown hinder January sales

New U.S. light-vehicle sales are expected to be little changed in January from the start of 2018, though the record cold sweeping through the Midwest during the all-important closing stretch of the month makes a decline more probable.

And while the lengthy government shutdown that hurt business at dealerships near Washington has ended, the temporary nature of the resolution is unlikely to get federal employees in a buying mood.

A forecast from J.D. Power and LMC Automotive calls for sales to decline 1 percent and for a seasonally adjusted, annualized rate of sales of 16.8 million, the lowest since August. Cox Automotive projects a volume increase of 0.2 percent, or fewer than 2,000 vehicles. Edmunds says it sees sales rising 1.3 percent, but its forecast was issued last week, before the extent of the frigid weather became clear. (At Chicago’s O’Hare International Airport on Wednesday morning, the temperature was 22 degrees below zero with a wind chill factor of minus 49.)

“The January sales pace is expected to decline as shoppers pull back from the market and the holiday buying spree,” Charlie Chesbrough, Cox Automotive’s senior economist, said in a statement. “We normally see a drop off in January sales versus December and that will be the story this year as well. The government shutdown that dominated the news and a few negative economic indicators likely drove consumers to be more conservative as uncertainty increases. The record-setting cold forecast for this final week of the month won’t help either.”

J.D. Power said retail sales in the first half of the month were down 3.8 percent nationally — and 6.2 percent in the North Central U.S. as a result of a snowstorm.

Automakers are scheduled to report their January sales Friday. January is typically the lowest-volume month of the year, which means small swings in volume can disproportionately affect the SAAR.

Most analysts predict a sales decline for the industry in 2019, after a small gain last year that was tied to tax reform and higher fleet deliveries. But they generally wait at least until the spring selling season to start taking stock of how those projections are playing out. The government shutdown, halted after 35 days on Jan. 25, is adding to the difficulty of forecasting this year’s sales, and February results could be affected as well if Congress and President Donald Trump are unable to reach agreement by the new Feb. 15 deadline.

“January is such a slow sales month that it doesn’t carry much weight when it comes to predicting the health of the auto market for the full year,” Jeremy Acevedo, Edmunds’ manager of industry analysis, said in a statement.

Sales volumes may be flat, but bottom-line results continue to head in a positive direction for most automakers. The industry’s average transaction price is on pace for a January record of $33,285, up 3 percent from a year ago, J.D. Power said. At the same time, it said incentives are down 3.5 percent to $3,720 per vehicle.

“The sky isn’t falling but, coming off a solid 2018, the auto industry faces headwinds that are likely to pull down demand this year and into 2020,” Jeff Schuster, president of Americas operations and global vehicle forecasts for LMC, said in a statement. “The key thing to watch is production. If manufacturers overproduce, it will drive up inventory levels, and that can drive up incentives. The industry has to be careful.”

The forecasts from Cox and Edmunds show FCA US, Subaru, American Honda and Hyundai-Kia gaining market share in January. They project lower share for General Motors, Toyota Motor North America and Nissan Group.

The predictions for Ford Motor Co. and Volkswagen are mixed. Edmunds predicts a 12 percent sales gain for Ford, while Cox sees Ford posting a 3.4 percent decline. Combined VW-Audi sales are seen declining 8 percent by Edmunds but rising 4.4 percent by Cox, which includes Porsche with VW and Audi.

Be the first to comment

Leave a Reply

Your email address will not be published.