U.S. Auto Sales Slow in Second Half of Year... Impact of Presidential Election and High Interest Rates

First Half Sales Up 2.9%... 15.7 Million Units Annually

As the November presidential election approaches, uncertainty in the U.S. automotive industry is increasing, leading to a forecasted slowdown in car sales in the second half of the year.

On the 25th (local time), Cox Automotive projected that U.S. car sales will decline in the second half of this year due to the presidential election and interest rates.

[Image source=Reuters Yonhap News]

Cox expects U.S. car sales in the first half of this year to increase by 2.9% compared to the same period last year, but sales are expected to slow in the second half, with the 2024 seasonally adjusted annual rate (SAAR) forecasted at 15.7 million units, representing a 1.3% increase year-over-year.

Additionally, while recent years have seen a high volume of sales to profitable individual consumers, this year the commercial sales sector is growing. Commercial sales such as rentals and leases are experiencing double-digit growth, but the share of individual consumer sales is expected to fall to 79%, down 9 percentage points from 2021.

Jonathan Smoke, Chief Economist at Cox, stated, "Overall, we expect a slight weakness in the coming months," adding, "We are basically assuming that the sales pace we have seen so far cannot be maintained. However, we do not anticipate a market collapse."

Charlie Chesbrough, Senior Economist at Cox, said, "There is a lot of uncertainty, which could make it difficult to continue the recent sales success," and expressed concern that "the growth seen so far may not be sustained in the second half."

With the presidential election in November approaching, high vehicle prices, inflation, and high interest rates are cited as causes of sluggish vehicle sales. Both consumers and sellers identified inflation as their biggest concern, with 74% of consumers and 81% of car dealers responding that the election will impact inflation. However, 38% of car dealers expect sales to worsen after the election, while 31% each believe sales will either increase or remain the same, showing divided opinions on post-election sales prospects.

Vanessa Thorne, Senior Manager at Cox, said, "If consumers believe that interest rates will decrease or that the economy will improve or worsen after the election, they are likely to remain on the sidelines until the situation stabilizes."

General Motors (GM) is expected to be the winner in the U.S. automotive market in the first half of the year. Toyota and Honda sales are also high. On the other hand, Tesla's sales are estimated to have decreased by 14.3%, and Stellantis is expected to see a 16.5% decline in sales.