US new vehicle sales are expected to rise 7.3% in December

CALIFORNIA

New vehicle sales in the United States are projected to increase by 7.3% in December, according to a joint report released Thursday by industry consultants J.D. Power and GlobalData. The growth comes despite ongoing market pressures, supported by enhanced discounting from manufacturers and dealerships.

The December sales forecast anticipates total new vehicle sales reaching 1,520,000 units, marking an increase from the previous year despite one fewer selling day in the month. The seasonally adjusted annualised rate for total new vehicle sales is expected to reach 17.2 million units, representing an increase of 1.1 million units from the prior period.

Thomas King, president of the data and analytics division at J.D. Power, noted that whilst per-unit vehicle profits are declining, consumer demand has remained steady. This resilience has been supported by increased inventory availability and enhanced leasing activity, contributing to robust year-end performance.

However, the projected 7.3% increase represents a significant moderation from the 13% growth forecast made by the consultants in December of the previous year, indicating a cooling in market momentum.

The electric vehicle sector faces particular challenges, with consumer interest showing signs of decline. Current data indicates that only 25% of new car buyers are considering an electric vehicle for their next purchase, marking a 2% decrease from the previous year. This shifting consumer sentiment has affected major electric vehicle manufacturers, including Tesla, which has experienced a reduction in its share of electric vehicle sales in 2024.

Looking ahead to 2025, S&P Global Mobility projects US auto sales will reach 16.18 million units, representing a modest 1.2% increase from the current year. Chris Hopson, manager of North American light vehicle sales forecasting at S&P Global Mobility, cautioned that the affordability challenges that constrained automotive demand throughout 2024 are likely to persist into 2025.

The current market dynamics reflect a complex interplay of factors affecting the automotive sector. Whilst sales continue to grow, the pace of expansion has moderated, influenced by high interest rates and ongoing affordability concerns. The declining interest in electric vehicles adds another layer of complexity to the market outlook, potentially affecting manufacturer strategies and investment decisions in the coming year.

The automotive industry's ability to maintain sales growth whilst managing declining per-unit profits highlights the delicate balance between volume and profitability in the current economic environment. The continued use of discounting strategies by manufacturers and dealers suggests ongoing efforts to stimulate demand despite market headwinds.