New Jeep vehicles are parked at a Dodge Chrysler-Jeep Ram dealership on October 3, 2023 in Miami, Florida.
Joe Raedle | News Getty Images | Getty Images
DETROIT — U.S. new vehicle sales are expected to struggle in the third quarter amid economic and political uncertainties, as well as higher interest rates and prices, according to industry forecasts.
Sales are expected to fall about 2% in the third quarter compared to the same period in 2023, to about 3.9 million vehicles sold, according to at Cox Automotive and Edmunds.com. This would be a decrease of about 5% compared to the second quarter of this year.
Analysts note that the Federal Reserve’s decision last week to cut interest rates was a step in the right direction, but does not necessarily guarantee a significant uptick in auto sales for the rest of the year.
“2024 was a volatile year for the new vehicle market, and more of the same is expected in the 4th quarter,” said Charlie Chesbrough, senior economist at Cox Automotive. “Affordability remains the main barrier to a stronger market, but it is improving, so we remain bullish on the industry’s sales outlook.”
Both Cox and Edmunds expect U.S. light vehicle sales to total about 15.7 million vehicles in 2024. Edmunds maintained its year-to-date guidance, while Cox cut it from its initial forecast of 16 million.
Jessica Caldwell, Edmunds’ chief information officer, said the current market is too expensive for many consumers, limiting the number of Americans who can afford a new vehicle.
“Who can afford new cars seems to be the big issue. People, on average, have to finance $40,000 for a new car,” he told CNBC. “The new market is quite restrictive for many buyers.”
The average transaction price for a new vehicle is down from a year ago, but remains elevated compared to historical levels at $47,870, according to Cox.
Honda motor and Ford Motor is expected to be among the only major automakers to show growth in the third quarter compared with a year earlier, according to forecasts. Those with the biggest losses are expected to be included Stellandis, Toyota Motor and BMW.
Stellantis sales, which Cox predicts will fall as much as 21% in the third quarter from a year earlier, have been in freefall for more than a year. CEO Carlos Tavares has prioritized pricing and profits over market share, especially with the automaker’s critical Jeep and Ram brands.
As for electric vehicles, sales are increasing but still slower than many previously expected. Sales of electric vehicles are expected to rise about 8% in the third quarter compared with a year earlier, according to Cox.
The projected increase in EV sales comes despite a 2.4% sales decline forecast during the quarter for the US leader. TeslaCox reports. Tesla, which has dominated EV market share for years, is expected to see its share fall below 50 percent for the second straight quarter, according to Cox.
Electric vehicle sales are heavily aided by incentives. While average transaction prices for new EVs are expected to be flat year-over-year, vehicle incentives are expected to have increased, accounting for 13.3% of the average vehicle transaction price. This is the highest rate so far this year and more than 80% higher than incentives for traditional vehicles with internal combustion engines.
EV incentives include a federal credit of up to $7,500 from the US government for consumers to purchase or lease an electric vehicle. Not all new electric vehicles qualify for the incentive, unless they are leased.
