DETROIT — U.S. sales of cars and light trucks are forecast to slow this year. At the same time, potential trade fights may cast a shadow over the industry, an economist said Sunday ahead of the North American International Auto Show.
Light-vehicle deliveries totaled more than 17 million each of the past four years. “This is the year we see it going down” below 17 million, Jonathan Smoke, chief economist for Cox Automotive, said at a presentation in downtown Detroit.
Cox Automotive’s forecast is for 16.8 million vehicles in 2019, slipping to 16.5 million in 2020. Smoke puts an asterisk on the latter figure because “if you beyond this year, there’s a greater chance of a recession.”
Sales totaled 17.3 million last year, according to Automotive News. That was better than forecasts issued at the start of 2018. The 2018 figure was fattened by increased fleet deliveries, which typically are less profitable that deliveries to individual buyers. Fleet purchases were helped by changes to U.S. tax law that took effect at the start of 2018, which cut business tax rates.
That has now worn off, Smoke said. “We’re no longer having the effects of tax reform,” he said.
Cox Automotive estimates that fleet deliveries increased by more 200,000 vehicles last year. Three automakers, General Motors Co., FCA US and Hyundai Motor Co., accounted for almost 60% of the increase, according to Cox.
At the same time, the auto industry may receive new problems if the Trump administration implements a 25% tariff on imported cars and parts.
The U.S. Commerce Department said last year it’s conducting what’s known as a Section 232 investigation to see if vehicle imports imperil U.S. national security. That was the reason the administration imposed tariffs of 25% on imported steel and 10% on aluminum. Representatives of the auto industry said at a July meeting they were against auto tariffs.
Smoke said the administration may implement auto tariffs because it needs “a lever” as it seeks trade accords with other countries and regions. A trade war between the U.S. and China is on hold amid talks. Trade tensions also exist between the U.S. and other countries in Asia as well as the European Union. The U.S. also reached a new trade agreement with Canada and Mexico last year but the accord hasn’t been ratified yet.
Smoke warned auto tariffs could escalate if implemented. It’s possible, he said, “the auto industry will create the next recession.”