Spring selling season: speed bumps ahead?

As spring arrives across the country, automobile retailers are gearing up for the usual bump in sales after the winter doldrums. There is a host of new products to excite consumers — from sports cars to electric vehicles — yet there is also a healthy reservation sweeping the auto industry as a host of data conflicts with the seasonal optimism.

While the 2018 sales year turned in very respectable numbers in America, essentially matching 2017’s 17 million-plus new vehicle sales, electric cars saw negligible growth despite new products. GM and Ford both announced that they were backing away from automobile production, ending some storied names like Taurus, Impala and others. Although the Impala has gained a temporary reprieve — with production continuing until 2020, consumers can be forgiven for wondering what will happen to other marquees, and even some brands, as the industry is truly in a state of flux.

Despite the ever-expanding roster of SUVs, CUVs and SAVs entering the market, including the return of Chevy’s Blazer, now a midsize two row crossover, or Honda’s Passport (also a new two-row mid-size crossover), buyers just can’t get enough of these two-box designs. Toyota, with one of the very top-selling non-pickup offerings in the redesigned RAV4, is banking on this vehicle to cover the shrinking sales of Camrys and Corollas, while its Tacoma pickup fights off a challenge from Ford’s returning Ranger as well as the expected assault on the “small” pickup category from the new Jeep Gladiator.

So car choices are streamlining as the typical family sedan has essentially shrunk to less than 30 percent of the market, a sharp decline from just a few years ago.

Yet retailers can compensate for that transition; other products still give consumers a lot of driving choices, like perhaps a Toyota Supra sports car or new BMW Z4 convertible. Of course, thousands of consumers are still waiting for their $35,000 Tesla Model 3, which seems ever more distant even as the brand made a $2,000 price cut in January. Data indicates that the least expensive Model 3 in production starts at $42,900 — a full $7,000 more than the average new vehicle transaction price in 2018.

And that is just one of the headwinds industry analysts are watching. New car prices have been rising, swiftly. Some of the pricing increases are due to the enhanced levels of safety and electronic driving gear, yet many buyers are opting for numerous features that are “gotta have” components — which quickly drive retail prices up.

This leads to higher monthly payments, longer loan plans, or, sometimes both. With millennials and Generation Y consumers already carrying higher levels of debt, many of these auto buyers are forced into the used car market — where prices are also increasing. Government data states that the median income levels for these two segments of the buying public is much lower than previous generations, forcing many to use their parents for loan co-signing in order to purchase any vehicle. This puts pressure on this older segment of the population, lowering their credit scores and limiting their buying power in a new car market.

Further adding to the cloud over the industry is the sudden slowdown in China — the world’s largest new car market — which has had eight straight months of diminished sales. China’s previously roaring auto sales were also pushing more EV sales; those have also stagnated just as numerous domestic and import brands are pouring new EV products into China.

In Europe, sales data states that EV sales have plateaued. In America, EV sales remain barely 1 percent of new car sales, with many new models heading to showrooms this year and next. Automakers have to be very concerned where these expensive to build (and develop) cars will go if consumers continue to show lackluster interest for what is proving to be very expensive early-adopter models.

The bright spot for optimists is that content levels are very high, across the board, so anyone who has been out of the new car market for several years (America’s driving fleet averages 11 years old) should be duly impressed with the features on most all of today’s new vehicles. And, with those inventories creeping up, spring and summer could bring prolific promotions to clear the lots and keep the iron moving.

If April showers truly bring May flowers, the car industry is hoping for lots of roses by summer so that both new and used car sales continue to roll and the economy stays stable for all segments.

Tim Plouff

Tim Plouff

Columnist at The Ellsworth American
Tim Plouff has been reviewing automobiles in the pages of The Ellsworth American weekly for nearly two decades.

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