Cars are parked in the parking lot of a Chevrolet dealership in Chicago, Illinois, on June 20, 2024. A cyber attack on CDK Global, a software provider that assists dealers in managing sales and service, disrupted operations of approximately 15,000 dealerships in the United States and Canada.
DETROIT – U.S. auto sales are expected to increase 2.9% in the first half of this year compared to the previous year. However, there are concerns that the auto industry may struggle to maintain its momentum in the final six months of the year.
Cox Automotive reports that vehicle inventory levels are rising, incentives are increasing, and uncertainties surrounding the economy, interest rates and the U.S. presidential election are growing in the second half of the year.
The automotive data and research firm expects sales growth to slow in the second half of the year, with an estimated total of 15.7 million units sold by the end of 2024, up 1.3% from 2023. Unlike previous years, growth is expected to come from commercial sales rather than more profitable consumer sales.
“Overall, we expect some weakness in the coming months,” Jonathan Smoke, chief economist at Cox, said during a mid-year review briefing on Tuesday. “We are assuming that we will not be able to sustain the pace that we have seen, but we do not foresee a collapse either.”
These circumstances present favorable conditions for consumers, some of whom have waited to purchase new vehicles due to unprecedented supply and record prices amid the COVID-19 pandemic.
However, they pose challenges for automakers, many of which have posted record profits due to high demand and limited availability of new vehicles during the global health crisis. Wall Street analysts have predicted pricing and profit challenges for most automakers, given the record or near-record levels seen in previous years.
“We have a lot of uncertainty ahead, and that could make it difficult to build on recent sales successes,” said Charlie Chesbrough, Senior Economist at Cox, during the briefing. “We are concerned that the second half of the year may not support the growth we have seen so far.”
Cox expects the rental, retail and leasing segments to show double-digit growth, while the retail sector’s share of the overall market is expected to decline 9 percentage points from 2021 to approximately 79%.
Cox said the “winners” in terms of sales in the first half of this year are expected to be General Motors, Toyota and Honda. Chesbrough said that if Toyota continues its growth, it could once again challenge GM as the top-selling automaker in the United States. Toyota has outsold all other automakers for the first time in 2021.
On the other hand, Tesla is estimated to suffer a 14.3% decline in sales, while Stellantis is expected to decline 16.5% through June. Honda surpassed Stellantis in U.S. sales during the first half of the year, pushing parent Chrysler and Jeep to sixth place in sales from fourth place.
Stellantis CEO Carlos Tavares recently acknowledged “arrogant” mistakes he and the company made in their U.S. operations, which led to sales declines, inflated inventories and investor concerns.
“Higher incentives mean we are officially saying goodbye to the sellers’ market that has characterized the last four years…which also means a further deterioration in new vehicle profits and dealer profitability,” Smoke noted.
