Tue, May 02, 2017 - Page 11 News List

A US$50,000 van explains slowing auto sales in US

Bloomberg

Fiat Chrysler CEO Tim Kuniskis addresses the media after the Chrysler Pacifica won Utility Vehicle of the Year at the North American International Auto Show in Detroit, Michigan, on Jan. 9.

Photo: AP

To understand why the US auto market is not growing, consider that a top-of-the-line minivan from Fiat Chrysler Automobiles NV costs about US$50,000.

With twin second-row touch screens, reclining third-row seats, a vacuum and automated parallel parking, the Chrysler Pacifica packs plenty of features to justify a hefty expense, but this big a price tag puts the prototypical family vehicle out of reach for most Americans.

After US auto sales fell in each of the first three months of the year, the annualized sales pace, adjusted for seasonal trends, probably slowed last month to about 17.1 million, from 17.4 million a year earlier.

With marginal buyers beginning to balk due to sticker shock, Ford Motor Co cautioned last week it is not going to be able to count on price increases to boost North American profits the rest of this year.

“At some point that will be one of the aspects that will continue to drive down the volume,” Ford chief financial officer Bob Shanks said in an interview. “It will become tougher.”

The average new-car price in the US rose about 2 percent over the past year, according to data from TrueCar Inc’s ALG.

That is an increase more consumers might have been able to stomach when borrowing costs were low, and loose credit made pricier trucks and sport utility vehicles more attainable.

“Honestly, the average American doesn’t come into a new-car dealership,” National Automobile Dealers Association chief economist Steven Szakaly said. “We’re only selling new cars to about 5 percent of the US population.”

As inflation generally outstrips wage increases and young adults find themselves buried under student debt, new cars are becoming less feasible for some would-be buyers, Cox Automotive senior analyst Michelle Krebs said.

“It’s not just the price of the cars — it’s the price of everything else,” she said. “The price of things like healthcare, shelter — all of that is fighting for the budget.”

If vehicle purchases per million driving-age Americans were the same as in 2000, the industry would be selling almost 20 million new light vehicles a year — well beyond last year’s record of just under 17.6 million. Instead, the US auto sector is on pace for its first year of decline since 2009.

“We’re starting to see the slowdown in 2017 we’ve been anticipating,” said Jessica Caldwell, executive director of industry analysis for car-shopping Web site Edmunds.com. “These year-over-year declines may become more typical as the year progresses.”

With the exception of Nissan Motor Co, the biggest automakers in the US are projected to report declining US sales for last month, according to a Bloomberg News survey of analysts.

Fiat Chrysler and Honda Motor Co could post declines of more than 5 percent.

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