Auto sales expected to drop in February

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Auto analysts expect February sales to decline 4 percent year-over-year.

Charlie Chesbrough, senior economist for Cox Automotive, attributed the decline to a slowing sales pace, interest rates rising and the recent volatility in the stock market.

“Our expectation, as we get through the course of year, is we are going to see the sales pace modestly decline. But it is still important to note sales volumes may be down but transaction prices still remain strong,” Chesbrough said.

Automakers release their February new vehicle sales on Thursday. February 2017 and 2018 both had 24 selling days.

Analysts at Cox Automotive predict automakers will sell 1.275 million new vehicles in February and Edmunds’ analysts have a slightly lower prediction of 1.273 million.

February is typically one of the year’s worst sales months because of the weather.

“Generally we see sales down in the winter months as many consumers are waiting for new products,” Chesbrough said.

The vehicles that are selling are not the compact cars, such as the locally built Chevrolet Cruze. February compact car sales are expected to decline 16.1 percent while crossover sales are expected to increase 13.1 percent year over year, according to Cox Automotive analysts.

“Usually for the rest of the winter we will see stronger SUV and truck sales,” said Jessica Caldwell, Edmunds executive director of industry analysis.

Chesbrough did say that with the tax reform, compact car sales could see an uptick because of higher take-home pay.

“That may help some of the lower income folks,” he said. “There may be some upside potential to support the smaller car segment.”

Analysts expect most automakers to post year-over-year sales declines. Despite the down market, analysts stressed the importance for automakers to watch their incentive spending.

“Incentives are still going to be high but we don’t expect them to grow [during the year],” Caldwell said. “When incentives are too high automakers are spending a lot of money. It could hurt the residual value of the vehicle. It just devalues your brand.”

For the year, Cox Automotive predicts total sales to decline to 16.7 million from 17.1 million in 2017. Edmunds predicts total 2018 sales of 16.8 million.

This year would be the second year in a row of sales declines after the industry saw seven consecutive years of sales growth.

“We are in a post-peak period,” Chesbrough said.

The prediction for the year of 16.7 million “is still a strong year,” he said.

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