After posting two consecutive declines in January and February, U.S. light-vehicle sales are looking at their weakest start for a year since 2014. February sales took a 2.9 percent dip to 1.27 million vehicles, bringing the industry's annualized selling rate to an 18-month low.
Neither the buoyant state of the economy nor the pent-up demand after January's harsh weather and government shutdown have done much to boost demand. According to Charlie Chesbrough, Senior Economist at Cox Automotive, the light-vehicle market now appears to be rapidly weakening.
Drops in auto sales are not uncommon during the first two months of the year. However, 2019's numbers mark the biggest decline for January and February since 2009. Analysts are now waiting for sales data from March to see if reduced tax refunds will continue to restrict sales.
One of the few positives for the auto industry at the moment is low incentive spending. According to TrueCar Inc.'s data and analytics subsidiary ALG, average incentive spending in February 2019 came in at $3,653 per vehicle, signifying a 0.8 percent drop from last year.
Going forward, analysts expect rising vehicle prices and interest rates to continue limiting sales for the rest of the year. ALG has recorded a 3 percent increase in average transaction price from February 2018 to February 2019. Edmunds reports that financed new vehicles are now incurring an annual percentage rate of 6.26 percent, significantly higher than last year's 5.19 percent.
With a growing number of shoppers getting priced out of the new-vehicle market, used vehicles are likely to get much more attractive. Further, a large number of leases on vehicles are set to mature in 2019. According to Chesbrough, as many as 4.1 million used vehicles – many of them SUVs and crossovers – may soon become available to consumers, adding more pressure to the new-vehicle market.
The Automotive News Data Center recorded February's seasonally adjusted annualized selling rate as 16.61 million. This is a steep decline from February 2018's 17.08 million. It is also a considerable drop from the 16.9 million recorded this January, and is the lowest rate since August 2017's 16.58 million.
Mercedes-Benz and Nissan Group posted the biggest declines from February 2018, both recording 12 percent drops in sales. Sales also fell for General Motors (5.3 percent) and Ford Motor Co. (4.4 percent for soft car sales, 3.1 percent for F-series pickups). Toyota Motor North America recorded a 5.2 percent drop in sales despite a 4.4 percent rise for its Lexus brand. FCA U.S. sales were also off by 2.3 percent, even though Ram posted a 24 percent growth.
For some auto makers, light-vehicle sales have grown despite the weak market. These include Subaru (3.9 percent), Hyundai-Kia (4.4 percent), and Jaguar Land Rover (29 percent). Subaru's sales rose for the 86th successive month, while Hyundai-Kia and Jaguar Land Rover have had 4 consecutive months of growth.