Automotive supplier industry overview and indicators
Baker Tilly Capital, LLC’s automotive supplier M&A newsletter provides an overview of the North American automotive supplier sector, including recent performance and North American M&A trends.
The domestic automotive market has seen mixed results during the first half of 2017 (H1-2017). Year-over-year total car sales were down 13.9 percent in June 2017. Year-over-year light vehicle sales declined by 1.2 percent in June 2017, but total light truck sales grew by 5.6 percent during the same time period.1 Although vehicle sales have declined during H1-2017, new vehicle transaction prices reached a record high for June of $31,720.
“Overall consumer demand for new vehicles is still very healthy,” said National Automobile Dealers Association (NADA) chairman Mark Scarpelli during NADA’s quarterly economic briefing. “Consumer tastes continue to trend away from sedans and toward light trucks and SUVs. Sedans now account for 37 percent of sales, meaning that roughly two out of every three retail transactions are now a light truck, SUV or crossover. Simply put, there is great demand for the utility that SUVs and light trucks provide.”
The primary driver of the decline in the total sales pace is a pullback in fleet volume, which are projected to be down 8 percent for H1-2017, while retail sales, assisted by elevated incentives, are projected to contract by 0.6 percent for the same period. It will be challenging in the second half of the year to keep pace with 2016, so some additional weakness and further risk are expected in both fleet and retail volume, but expected 2017 sales are to be above 17 million units.
The prolonged pullback in fleet volume combined with the leveling off of the retail market has led to another trimming of the outlook for 2017. LMC Automotive’s forecast for 2017 total light-vehicle sales has been cut to 17.1 million units, down from 17.2 million last month and a decline of 2.6 percent from 2016. The retail light-vehicle outlook has also been reduced by 50,000 units but continues to round to 13.9 million units, a decline of 1.8 percent from 2016. Fleet volume is now expected to be down 6.1 percent from 2016.
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