It is expected that automotive sales for the month of April will match the pace of March sales, meaning the first quarter high demand for new vehicles is not slowing. Jeffries & Company analyst Peter Nesvold’s research note states, “April sales have not been influenced by any extraordinary demand events and appear to be driven by good old-fashioned consumer demand for new cars.”
Thomson Reuters’ survey of 41 analysts revealed expectations for April sales to reach an annualized pace of 14.4 million vehicles, which beats the previous year’s April numbers. Reports of U.S. sales by automakers should be out by Tuesday.
Still, some analysts are voicing concerns related to the higher than average temperatures this spring as well as the potential effect of the upcoming presidential election. Morgan Stanley analyst Adam Jonas said, “There’s a feeling that the first quarter is as good as it gets. The rest of the year is going to be complicated with more European tail risks and political risk.”
As the job market improves, so does consumers’ appetite for new vehicles. Cheap financing proves an ongoing incentive to car buyers eager to replace aging vehicles that consume more gasoline. As a result, March sales rose approximately 13 percent, making the first quarter of this year the best since 2008. The average age of vehicles in the U.S. has climbed to almost 11 years, which is the highest on record. Fuel prices have also risen, creating the need for drivers to replace the aging vehicles with more fuel efficient, later models.
Recovery for the auto market has been spotty for the past 24 months, but March sales hint at a more consistent recovery of the economy and of improving auto sales now and in the future. Many buyers have been waiting until the job market and the economy improved before making a new purchase, and now the market is seeing the results of improving consumer confidence.
It is expected that April sales will be between 14 million to 14.2 million vehicles, according to Jefferies research. Edmunds.com predicts an even bigger 14.4 million and incentive levels falling to their lowest level since 2002.
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