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Consumers opt for "more vehicle"

Auto Sales Expected to Fall, But Industry Keeps Cool

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Article Highlights

  1. Last year’s sales came in at 17.1 million, the third straight year volume exceeded 17 million, a run that set an industry record.
  2. And although consumers likely will purchase fewer vehicles this year, they are buying “more vehicle,” Cox Automotive Chief Economist Jonathan Smoke says. They’re opting for higher-profit utility vehicles, upscale trim levels and assorted options. That beefs up transaction prices. (The average vehicle transaction price now is nearly $35,000.)
  3. Today, when automakers put profits before sheer sales volumes, they not only behave wisely, they also do what Wall Street wants and expects. Volume over profit is so yesterday.

The auto industry’s party isn’t over, but some of the guests are leaving.

Last year’s sales came in at 17.1 million, the third straight year volume exceeded 17 million, a run that set an industry record.

This year, WardsAuto predicts sales of 16.4 million, largely because pent-up demand that had built up during the recessionary years has pretty much abated.

So, U.S. dealers are expected to sell about 700,000 fewer vehicles this year compared to last. That’s not great news. But there was a time when the auto industry would have considered that catastrophic.

Back then, when prospective annual sales were off by a few hundred thousand units – let alone 700,000 – headlines would scream, analysts would predict the end of civilization as we know it and automakers would knee-jerk so hard they required arthroscopic surgery.

It is different now for a couple of reasons.

One is that automakers – the big ones anyway – focus more today on profits rather than on soaring sales volumes. Sure, everyone wants to sell a lot of vehicles, but not at losses.

And although consumers likely will purchase fewer vehicles this year, they are buying “more vehicle,” Cox Automotive Chief Economist Jonathan Smoke says. They’re opting for higher-profit utility vehicles, upscale trim levels and assorted options. That beefs up transaction prices. (The average vehicle transaction price now is nearly $35,000.)

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