Toyota Says the U.S. Auto Market Has PeakedBy and
Industry sales may drop to 17 million, Toyota executive says
J.D. Power analyst warns incentives at ‘recession-era level’
The U.S. auto market has peaked and will shrink this year, with manufacturers using unprecedented incentives to support passenger cars through slumping demand, a Toyota Motor Corp. executive said.
Industrywide deliveries may decline to as low as 17 million vehicles from last year’s record of about 17.5 million, according to Bob Carter, president of Toyota’s U.S. sales unit. A rapid shift in demand toward sport utility vehicles at the expense of sedans is the main factor driving automakers’ heavy discounts, he said.
“Once the industry starts to get their pipelines lined up to where the consumer demand is, perhaps we’ll see a little bit of relaxing on some of these high incentives,” Carter said Tuesday at a conference in New York hosted by the National Automobile Dealers Association and J.D. Power. Toyota’s discounts are “higher than we’ve ever experienced,” driven by light trucks reaching about 65 percent of industry sales, up from roughly half.
After seven straight years of growth, U.S. auto sales have declined in each of the first three months of 2017. The slowdown has contributed to a new-vehicle inventory glut, plus a flood of cars returning to the used market after their leases expire has started to depress their prices. To clear lots and buoy demand for new autos, manufacturers have been spending an average of more than $4,000 on incentives per vehicle, a record, according to J.D. Power.
Maintaining last year’s record sales place would do long-term damage to the industry, Thomas King, a J.D. Power analyst, said at the conference. The researcher projects deliveries will likely match last year’s levels because of discount offers equal to about 10 percent of the average price for new vehicles.
Industry sales results are “being driven by recession-era level of incentives,” King said. “You can’t have those two things coexist in a definition of a healthy industry.”
Toyota’s shares fell 2.1 percent as of 11:12 a.m. in Tokyo trading, the biggest drag on the benchmark Topix index, which slid 1.3 percent.
Toyota’s Carter said the company is expecting industry sales will finish the year at 17 million to 17.2 million vehicles. The company was projecting the higher end of that range as of January. A decline to the low point would be the equivalent of about two large auto plants’ worth of production.
Passenger cars won’t go back to outselling SUVs, though the arrival of redesigned versions of Toyota’s Camry and Honda’s Accord sedans may keep the segment from declining further, he predicted.
“We do believe the industry is over the top, but that doesn’t mean we’re on a sled ride down from here,” Carter said. “After what we all collectively went through in 2009 and 2010, it’s going to be fine.”
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.