After several great years, car sales may dip this year. But this could be much better news than some gloomy headlines suggest.
Automakers sold roughly 17.6 million vehicles in the United States in 2016—a record—but the sales tally for 2017 is coming in about 5% lower, so far. Wall Street analysts have warned that automakers may have to deepen discounts to keep the metal moving. Shares of General Motors (GM), Ford (F) and Toyota (TM) are down this year, even with the broader market up.
But as slowdowns go, this is a good one. “The industry has plateaued at a historically high level,” Ford CEO Mark Fields tells Yahoo Finance in the video above. “We’re down, but still relatively healthy.”
A slowdown in car sales is a bit curious, since the overall economy seems to be heating up. Business and consumer confidence has been improving, on hopes President Trump will stimulate the economy. Job creation continues to be strong, and incomes are now starting to rise a bit more than during the last several years.
Fields says auto sales recovered faster than the overall economy following the 2007-2009 recession: “Our industry was way ahead of the rest of the economy in terms of its recovery. It actually led the economy to a certain degree, and I think it’s just syncing up at this point.”
Some analysts worry that Peak Auto is in the past, with younger Americans less interested in owning a car than their parents, and new services such as Uber and car-sharing providing cheaper alternatives to owning a car. On top of that, rising interest rates could crimp affordability.
Yet Americans have reverted to old habits in other ways. With gas cheap, SUVs are more popular than ever, and sales of larger vehicles with lower gas mileage have been booming. Automakers now sell more SUVs and crossovers than passenger cars. The average price paid for a car is more than $34,000, according to KBB. Prices have risen as buyers choose more trucks and SUVs, and add options such as the latest digital technology and early-stage self-driving systems. So while stock analysts might be bearish, Ford, GM and other automakers ought to remain nicely profitable for the foreseeable future.
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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman