The first half of 2024 has shown a 2.9% increase in U.S. auto sales compared to the previous year. However, there are looming concerns that this momentum may not be sustained in the last six months of the year. Factors such as growing vehicle inventory levels, increasing incentives, and uncertainties surrounding the economy, interest rates, and the U.S. presidential election are contributing to these worries, according to Cox Automotive.
Cox Automotive expects that sales growth will slow down in the second half of the year, resulting in a total of 15.7 million units sold by the end of 2024, reflecting a modest 1.3% increase from 2023. Interestingly, the growth is mainly coming from commercial sales rather than sales to consumers, which have been more profitable in recent years.
While the current circumstances may benefit consumers who have been waiting to purchase new vehicles, they present a challenge for automakers. Many automakers have recently experienced record profits due to high demand and limited vehicle availability. However, there are concerns that these profits may not be sustainable in the face of uncertainties lying ahead.
Challenges for Automakers
Wall Street analysts have been predicting challenges for automakers in terms of vehicle pricing and profitability. The expectations are that the second half of the year may not be able to maintain the growth seen in the first half. This could pose a significant challenge for automakers looking to build upon their recent sales successes.
Winners and Underperformers
According to Cox Automotive, General Motors, Toyota Motor, and Honda Motor are expected to be the “winners” in U.S. auto sales for the first half of the year. On the other hand, Tesla is estimated to experience a 14.3% decrease in sales, while Stellantis is forecasted to be down by 16.5% through June. Honda has surpassed Stellantis in U.S. sales, causing the latter to drop from its previous No. 4 rank to No. 6.
The Changing Market Dynamics
The increase in supply marks the end of the seller’s market that has characterized the past four years. This shift is likely to lead to a further decline in new vehicle grosses and dealer profitability, impacting the overall market dynamics for both consumers and automakers.
The U.S. auto sales industry is facing a period of transition and uncertainty as it navigates the challenges of the second half of 2024. While consumers may benefit from increased supply and incentives, automakers are bracing for a more challenging market environment ahead. The ability to adapt to changing dynamics and consumer preferences will be crucial for success in the remainder of the year and beyond.
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