Key Points
- U.S. auto sales are projected to grow only 0.2% in Q3, reaching 3.88 million units.
- Consumers are favoring more affordable models like compact pickup trucks and subcompact SUVs.
- General Motors expected to lead sales, but with a 3% decline; Ford and Toyota followed.
- Edmunds predicts a nearly 2% drop in overall sales, citing inflation and high interest rates.
The U.S. auto market is projected to see sluggish growth in the third quarter of 2024 as inflation and high vehicle prices deter consumers from purchasing new cars. According to industry experts, rising expenses and high interest rates have softened demand for new vehicles, with market research firm J.D. Power estimating a modest 0.2% growth in sales, reaching 3,882,600 units.
Consumers are increasingly turning to more affordable models, particularly compact pickup trucks and subcompact SUVs, as they navigate the financial pressures of inflation. Vehicles like Ford’s Maverick have become popular due to their lower price points than larger, more expensive models. Subcompact SUVs and compact cars are among the hottest segments in the market, offering consumers a balance of affordability and practicality, according to Charlie Chesbrough, senior economist at Cox Automotive.
Although there were initial expectations for stronger growth in the third quarter, discounts offered by automakers and an interest rate cut from the U.S. Federal Reserve have not been sufficient to stimulate demand significantly. It has led to weaker-than-expected sales figures across the board. Data from Cox Automotive indicates that General Motors (GM) is expected to maintain its position as the top-selling automaker in the U.S. but will likely experience a 3% drop in sales. Though neither has shown strong growth, Toyota and Ford are projected to follow GM in sales volume.
Auto research firm Edmunds offers a more pessimistic outlook for the quarter, forecasting a 2% decline in new U.S. vehicle sales. Edmunds also highlighted potential issues for automakers, including supply chain disruptions caused by the ongoing East Coast port strike, which could impact vehicle availability and further dampen sales.
Automakers like Ford and GM are already feeling the strain, with both companies’ shares falling on Monday. Ford saw a 2% dip, while GM dropped by 3% after Stellantis revised its 2024 profit forecast, warning of increased cash burn and more financial challenges ahead.
Chris Hopson, principal analyst at S&P Global Mobility, says, “Consumers continue to be pressured by high interest rates and vehicle prices, which translate into higher monthly payments.” This financial strain is expected to keep U.S. auto sales growth subdued shortly.
