U.S. new vehicle sales have been facing challenges in the third quarter of 2024, with economic and political uncertainties impacting consumer confidence. Industry forecasters predict a 2% decrease in sales compared to the same period in 2023, amounting to approximately 3.9 million vehicles sold. This represents a 5% decline from the second quarter of this year, reflecting the ongoing struggles in the market.
The Federal Reserve’s recent decision to cut rates has been seen as a positive step, but analysts caution that it may not lead to a significant increase in auto sales for the remainder of the year. Charlie Chesbrough, Cox Automotive senior economist, acknowledges the volatility in the new vehicle market this year and expects more of the same in the fourth quarter. He notes that affordability remains a key obstacle for consumers, but there are signs of improvement which provide some optimism for industry sales.
Both Cox Automotive and Edmunds.com anticipate light-duty U.S. vehicle sales to reach approximately 15.7 million vehicles in 2024. While Edmunds has maintained its guidance throughout the year, Cox has adjusted its forecast from an initial projection of 16 million. Jessica Caldwell, head of insights at Edmunds, highlights the issue of affordability in the current market, with the average consumer having to finance $40,000 for a new car. This high cost is limiting the number of Americans who can afford to purchase a new vehicle.
The average transaction price for a new vehicle is down from the previous year but remains elevated at $47,870, according to Cox Automotive. Honda Motor and Ford Motor are expected to be among the few major automakers to experience growth in the third quarter compared to the previous year, while Stellantis, Toyota Motor, and BMW are projected to face significant losses. Stellantis, in particular, has seen a decline in sales, with CEO Carlos Tavares emphasizing pricing and profits over market share.
In the electric vehicle (EV) segment, sales are on the rise, although at a slower pace than anticipated. Cox Automotive forecasts an 8% increase in EV sales in the third quarter compared to the previous year. Despite this growth, Tesla, the leader in the U.S. EV market, is expected to see a decrease in sales of 2.4% during the quarter. This decline could result in Tesla’s market share dropping below 50% for the second consecutive quarter.
EV sales are being supported by incentives, with the average transaction prices for new EVs remaining flat year-over-year. Incentives for EVs are expected to increase, representing 13.3% of the average transaction price, the highest rate so far this year. This is over 80% higher than incentives for traditional vehicles with internal combustion engines. The U.S. government offers up to a $7,500 federal credit for consumers to purchase or lease an electric vehicle, although not all new EVs qualify for this incentive unless they are leased.
Challenges in the Auto Industry
The auto industry is facing several challenges that are impacting new vehicle sales in the U.S. Economic and political uncertainties have contributed to a decline in consumer confidence, leading to a decrease in sales. The Federal Reserve’s decision to cut rates has provided some relief, but the overall market remains volatile. Affordability continues to be a significant concern for many consumers, with the high cost of new vehicles limiting the number of potential buyers.
Impact on Major Automakers
Major automakers are experiencing varying levels of performance in the current market. While Honda Motor and Ford Motor are expected to see growth in the third quarter, companies like Stellantis, Toyota Motor, and BMW are projected to face losses. Stellantis, in particular, has been focusing on pricing and profits over market share, which has resulted in a decline in sales for more than a year. The competitive landscape in the industry is shifting, with different companies navigating challenges in unique ways.
Trends in Electric Vehicle Sales
The electric vehicle segment is showing promise with a projected increase in sales during the third quarter. Despite the growth, Tesla is expected to experience a decrease in sales, potentially impacting its market share. Incentives play a crucial role in supporting EV sales, with the government offering credits for consumers to purchase or lease electric vehicles. As the market evolves, automakers are adapting to changing consumer preferences and regulatory requirements to stay competitive in the growing EV market.
Overall, the U.S. new vehicle sales forecast for the third quarter reflects the ongoing challenges and opportunities in the auto industry. As economic conditions and consumer preferences continue to evolve, automakers must adapt to meet changing demands and navigate the uncertainties that shape the market.
