Though the U.S. auto industry is facing tough times given higher interest rates, rising vehicle prices and the threat of tariffs on auto imports, it has shown resiliency. Auto sales in August are expected to rise 1.2% and 0.8%, respectively, per Edmunds.com and Cox Automotive.
Attractive Labor Day discounts and a booming economy buoyed by 18-year high consumer confidence and two-decade low unemployment rate have aided the momentum. Additionally, higher demand for comfortable SUVs and pickup trucks drove sales higher.
Of the six major American and Japanese automakers, Fiat Chrysler (FCAU – Free Report) led the way with sales climbing in double digits. This was followed by an increase of 4.1% for Ford Motors (F – Free Report), 4% for Nissan Motor (NSANY – Free Report), and 1.3% for Honda (HMC – Free Report). However, Toyota (TM – Free Report) saw a decline of 2% in auto sales last month. General Motors (GM – Free Report) sales also dropped 13% per The Detroit News.
Challenges Ahead?
Consumers have long been shifting from traditional passenger cars to larger and more comfortable pickup trucks, SUVs and crossovers. But the number of new models is now growing faster than demand, threatening the fat profits that automakers have enjoyed over the past several years. Additionally, higher rates have made financing of new vehicles expensive.
Further, the potential tariffs on cars and auto components and NAFTA renegotiations are the greatest threats to the auto industry. Per Cox Automotive, rising interest rates coupled with possible tariffs could raise new vehicle prices and payments and cut into auto sales in the second half.
While this year has been a challenging one, a strengthening economy, low unemployment, increasing consumer confidence, higher spending, fuel-efficient and technologically enriched vehicles, and robust demand for larger vehicles will continue to drive the industry. In addition, tax cuts are boosting consumers’ spending power, leading to higher demand for vehicles.
