TAMPA – A leading market research firm has warned that 2007 car sales will fall below expectations in 2007 to their lowest levels since 1998. If California’s 16% decline in car sales for November is any indication of next years’ performance, the car industry has much to worry about.
Many in the industry falsely claim the slowdown will only affect GM and Ford sales. A segment on CNBC featuring car industry experts pin the slowdown to a general slowing of the U.S. economy.More specifically, the slowing housing marketing is causing major concern.
First, the millions of families with adjustable rate mortgages are expected to pay more this year on loan interest. When these families calculate budgets, they will undoubtedly factor an increase home loan payment, leaving less discretionary income for an auto loan.
Second, while home sales are holding relatively steady, prices are declining. This means less equity in peoples’ portfolio, and subsequently, less cash to spend on automobiles.
We really expect to see a lot fewer second or third cars per family. This means sales will dull, but only by a small fraction. However, the drop in sales will not fly under the radar of the big automakers. They will take action to salvage the year as best as they can.
How will car makers respond?
Detroit will cut prices almost immediately fiscal year 2007. Look for Toyota, and Nissan bargains in mid to late 2007. Bargains for 2006 cars are expected to be in full force until the end of 2006.
References Cited and Further Reading
1) Finfacts Team. Retail sales mixed at start of US holiday season; Car sales forecast to fall in 2007 to lowest since 1998.” Finfacts Ireland: Business & Finance Portal. http://www.finfacts.com/irelandbusinessnews/publish/article_10008216.shtml
2) McIntyre, Douglass. “U.S. auto sales are slowing -- did Detroit cut enough?” Blogging Stocks. http://www.bloggingstocks.com/2006/11/27/u-s-auto-sales-are-slowing-did-detroit-cut-enough/
3) Flint, Jerry. “Automotive Hits and Misses.” Forbes Magazine. http://www.forbes.com/business/2006/11/27/autos-Detroit-automakers-biz-man-cz_jf_1128flint.html