Big discounts and high inventories, a toxic combination for the auto industry in the past, pose less danger today because a healthy economy is keeping U.S. sales at a near-record pace, analysts say.
Automotive News reported that February was a virtual repeat of January for the industry, as increasing consumer confidence and a long stretch of gains in the stock markets helped the annualized selling rate stay at 17.57 million for a second consecutive month.
There are signs of headwinds approaching, including rising loan delinquencies, interest rates and gasoline prices. Inventories for many brands are at their highest point since the dark days of 2009. But in the near term, automakers and dealers have plenty of reasons to remain bullish.
“When you look at overall sentiment from a macro perspective, the numbers certainly support strong performance related to sales,” said Alec Gutierrez, Kelley Blue Book’s senior market analyst of automotive insights.
Some forecasters, including LMC Automotive, say there’s a good chance U.S. sales will set an annual record for a third consecutive year, beating the 17.54 million vehicles sold in 2016. Even if that doesn’t happen, no one sees a steep drop-off in demand on the horizon.
“Tax cuts, new fiscal stimulus and improved “animal spirits’ could strengthen consumer spending and extend the auto cycle,” Brian Johnson, an analyst with Barclays Capital, wrote in a report last week. “But perhaps more importantly, in an otherwise flat market, [automakers] have shown greater willingness to use incentives to drive growth from share gains.”
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