Economic news

Inflation to Put U.S. Auto Industry in Low Gear

Oct 3 (Reuters) - Major automakers are expected to report modest declines in U.S. new vehicle sales on Monday but analysts and investors are concerned that a darkening economic picture, not inventory shortages, will lead to a drop in future car sales.

Thus far, a shortage of cars due to supply disruptions, combined with a preference for personal transport, has seen consumers willing to shell out more money, largely protecting profits at automakers and auto dealers who have pulled back on discounts.

But used-car dealer CarMax Inc rang the alarm bells on Thursday, suggesting consumers were beginning to pull back from big-ticket purchases due to decades-high inflation.

Analysts now warn demand may lose steam in the coming quarters as rising interest rates discourage consumers from paying more money for cars and trucks in the coming months.

"We are paying close attention to how the industry will react to these concerns. Perhaps there will be more incentives, longer finance terms, or a combination of these," said TrueCar analyst Zack Krelle.

More incentives might mean auto margins starting to shrink, as the industry finally begins to feel the pinch of inflation that has hurt other consumer sectors.

Third-quarter sales, however, will be more about parts shortages. Ford Motor Co (F.N) last month forecast it had about 40,000 to 45,000 vehicles in inventory at the end of the third quarter without some parts.


General Motors Co is set to outsell Toyota Motor Corp for the second consecutive quarter on improved inventory levels, according to industry consultants Edmunds and Cox Automotive.

GM, Ford and Tesla Inc will be among the biggest gainers year over year in the third quarter, with many Japanese brands - still struggling with inventory issues - booking the most significant declines, Cox said.

Edmunds said 3,393,988 new cars and trucks will be sold in the United States in the third quarter, a 0.9% decrease from a year earlier.

Reporting by Aishwarya Nair in Bengaluru; Editing by Maju Samuel

Source: Reuters

To leave a comment you must or Join us

More news

Back to economic news list

By visiting our website and services, you agree to the conditions of use of cookies. Learn more
I agree