Auto website Edmunds.com predicts U.S. auto sales will hit 16.4 million vehicles in 2014. That would be up about 6 percent over the 15.5 million expected in 2013 and would be the most since 2006, when Americans bought 16.5 million cars and trucks.
“The average age of all light vehicles on the road climbed to 11.4 years in 2013, and an aging fleet will continue to force buyers back to the market next year,” said Edmunds.com chief economist Lacey Plache. “With used car prices still elevated over past norms and used car supply still tight, the new car market will remain attractive to many of these buyers.”
Plache predicts the auto sales environment in 2014 will closely resemble 2013. Edmunds projects that new car sales will come in at around 15.5 million. That includes a continued flood of lease returns to the market: Edmunds estimates that 500,000 more leases will expire in 2013 than in 2012 and predicts it will grow by an additional 300,000 in 2014, accounting for about a third of all expected sales growth in 2014.
The selling rate for new cars and trucks in September was 15.3 million, down from 16.1 million in August.
Edmunds says if new car sales grow at the 6 percent rate it projects, it will be the slowest year-to-year growth since auto sales bottomed out in 2009.
“The economy has not yet improved enough for recovery to widely reach the groups hardest hit by the recession, including young people, lower-income households and small businesses,” said Plache. “Even though auto sales from these groups have improved from recession lows, their participation in the recovery still lags the rest of the market.”
Morgan Stanley auto analyst Adam Jonas said in a research note Tuesday there are warning signs for the auto industry, especially in “industry pricing discipline… This industry is clearly better than it was in 2006, but may not be quite as good as you think it is.”
Jonas noted that with so many automakers, the competition is brutal. “There’s a lot about the auto industry that has changed since before the great recession. Yet many things remain unchanged. Autos is still one of the most competitive, hyper-cyclical industries in the world,” Jonas said.
He said other issues are facing automakers.
“Credit losses are rising, sub-prime is back to record levels, auto loan term length has never been higher, leasing is booming, and used car prices are only slightly off their all-time peak before off-lease volume nearly doubles by 2015,” Jonas said. “Perhaps of greater concern is the 25 percent increase in North American capacity from 2011 to 2015 (3.5 million units) coupled with a 25 percent weakening of the Japanese yen. 2014 could be difficult.”
