NEW YORK–Auto dealers across the country say they are reducing the inventory on their lots in preparation for a slowdown in sales, with one going as far as to say he knows a recession is coming.
While sales of new cars and trucks rose steadily from 2009 to 2016, the longest growth streak since at least before the Great Depression, sales to individual buyers are now falling, the New York Times reported. “Even once popular sport utility vehicles and pickup trucks are sitting on dealer lots for longer stretches,” it added.
The result: dealers say they are ordering fewer vehicles from manufacturers.
Lot is ‘Full’
“We are turning down cars and are being more picky on the cars we stock,” Brian Benstock, general manager of Paragon Honda in New York City, told the Times. “We just can’t take more. We’re full.”
A slowdown in auto sales could weigh on the United States economy, the Times observed, as the auto industry is the largest manufacturing sector and makes up about 3% of gross domestic product. Automakers, parts manufacturers and dealers directly employ more than two-million people.
Retail vehicle sales fell 3.5% in the first half of the year to their lowest six-month total since the first half of 2013, according to J.D. Power and Associates, the Times reported, adding that AlixPartners, a consulting firm with a large automotive practice, estimates that sales will drop more than 2% in 2019, to 16.9 million vehicles. The firm expects the industry to sell 16.3 million vehicles next year and 15.1 million in 2021, according to the report.
‘Double Whammy’
Mike Jackson, chairman of AutoNation, told the Times rising interest rates and sticker prices have created a “double whammy” for consumers. “Customers are having monthly payment shock,” he said.
AutoNation, which has 325 franchises, said it now has 64,000 new vehicles in stock, 9,000 fewer than a year ago.
The Times noted a number of manufacturers have already made production line changes, including eliminating shifts and even closing plants.
“What is perhaps most worrying for the industry is that sales of larger vehicles — SUVs and trucks — that had more than made up for a recent collapse in purchases of sedans, are showing signs of strain,” the Times reported.
‘Headed to Recession’
A frequent question of economists at credit union meetings is when there might be another recession. One dealer, Doug Waikem, who manages six family-owned dealerships in Massillon, Ohio, indicated he feels confident a downturn is coming after such a long period of growth in a cyclical industry.
“We know we’re headed for a recession,” he told the Times.