New Car Sales Expected to Drop in June, but Volkswagen Will Surge

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New car sales are expected to drop 4% in June, a sign that the impressive run in the new auto market has not only plateaued but could be in trouble. The biggest exception to the trend will be Volkswagen, the sales of which are expected to rise over 9%, albeit to a fairly low number

A noted car research firm made this forecast:

New-vehicle sales are expected to fall nearly 4 percent year-over-year to a total of 1.46 million units in June 2017, resulting in an estimated 16.3 million seasonally adjusted annual rate (SAAR), according to Kelley Blue Book.

The figure affirms theories that the market is awash with newer cars bought over the past three years. Alternatively, consumers may have become leery of large purchases. Whatever the reason, manufacturers have begun to make adjustments. According to Tim Fleming, an analyst for Kelley Blue Book (KBB), the firm “projects June will be yet another down month of sales with expected declines in both fleet and retail.” KBB said:

With manufacturers continuing to announce production cuts at their plants following weaker consumer demand, it all but solidifies 2017 as a down year. Additionally, we are also seeing lease penetration rates come down from record highs and starting to see a slowdown in the growth of incentives as a result. Both are good signs for the long-term health of the automotive industry and show manufacturers’ commitment to profitability and preserving future used-car values.

VW will buck this trend, with sales that will pop 9.1% to 51,000. The company obviously has put the diesel engine scandal behind it, at least based on the activity of some American consumers. VW’s problem in the United States continues to be its market share, which is only 3.5%. VW is the largest car manufacturer in Europe based on unit sales, and one of the largest in China. With the amount of stiff competition in the United States, there is little reason to think its position will improve.

Ford Motor Co. (NYSE: F), which makes Ford and Lincoln cars and light trucks, is forecast to have another disastrous month. KBB forecasts a drop in sales of 9.7% to 216,000. That means rival Toyota Motor Corp. (NYSE: TM), which makes Toyota, Lexus and Scion vehicles, will almost catch it. The largest Japanese car company is expected to have a small drop of 0.9% year over year to around 200,000.

Market leader General Motors Co. (NYSE: GM) is expected to outperform the market despite sales off 1.3% to 252,000. GM makes the Chevy, Cadillac, GMC and Buick brands. The last of the big three American car companies, Fiat Chrysler Automobiles N.V. (NYSE: FCAU), which actually is based in Italy, will have a share drop off of 7.65% in sales to 187,000.

Among the companies with modest U.S. sales, Nissan, the maker of Nissan and Infiniti, is expected to gain 1.3% to 139,000. Honda Motor Co. Ltd. (NYSE: HMC) is expected to post a fall off of 2.7% to 135,000. It makes the Honda and Acura brands. Hyundai-Kia sales are expected to drop only 0.8% to 129,000. Kia recently was named the top car brand for initial quality by research firm J.D. Power.

Two of the smaller brands based on U.S. sales will do well. Subaru, which has been the most successful car company in the United States based on sales growth for over a year, is expected to post a 7.3% improvement in sales to about 50,000.

KBB’s forecast does indicate manufacturers will continue to struggle:

June 2017 would represent the fourth month in a row under 17 million SAAR, the longest period since a six-month streak from September 2014 through February 2015. After a record year of sales in 2016 and seven consecutive year-over-year sales increases, Kelley Blue Book’s forecast for 2017 calls for sales in the range of 16.8 million to 17.3 million units, which represents a 1 to 4 percent decrease from last year.

If the figure is at the low end of the forecast, companies that sell cars in the United States will need to brace for an unpleasant change.