NADA: Low gas prices to cause shift to light trucks in 2015

(January 26, 2015) SAN FRANCISCO — Low gasoline prices and pent-up consumer demand will combine to drive new car and light truck sales to an estimated 16.94 million in 2015, says the National Automobile Dealers Association. NADA’s original sales forecast of 16.4 million new cars and light trucks for 2014 was on target.

The split among the segments this year is expected to be 44 percent cars and 56 percent light trucks and SUVs because of lower gasoline prices, increased job growth and an improving housing market.

“Consumers are more able to spend for extras because of declining gasoline prices and continued low interest rates,” NADA Chief Economist Steven Szakaly said at a press briefing during the NADA Convention & Expo in San Francisco.

“We expect to see significant growth in sales of light trucks, particularly in the large-size CUV and SUV segments,” he added. “At the end of the day, consumers like the utility and comfort that larger vehicles provide. Lower gasoline prices accelerate that shift.”

The pickup truck segment, in particular, is expected to benefit from an improving housing market, climbing to 15.2 percent this year from 13.7 percent in 2014.

On the downside, small and midsized cars are likely to face a tougher market in 2015. Szakaly expects incentives to rise on small and midsize vehicles. In addition, hybrid sales are expected to be slower, as long as oil remains cheap.

Midsize cars are expected to decline in share of total light vehicle sales from 18.6 percent to 17 percent, while small cars are expected to lose 1 percent of share.

“The one area where prices and segment share are likely to remain stable is in the luxury segment,” he added. “A strong luxury brand, in any retail business, will hold extra goodwill that a consumer is willing to pay for.”

NADA’s economic outlook calls for gross domestic product to be up 3.1 percent in 2015, with the potential for growth to exceed that level.

“The U.S. economy is poised to accelerate in 2015. The only negative remains stagnant wages. If we see some sustained rise in incomes, GDP could easily exceed our forecast,” Szakaly added.

There is little threat of inflation, though key policy rates from the Federal Reserve are expected to rise 50 basis points by the end of the year.

“Interest rates have to raise, admittedly the chaos in some overseas markets and the strong deflationary pressures from a rising U.S. dollar and a slowing Chinese economy leave room for rates to rise slowly,” he said.

“The bottom line is that it will be a good year for consumers with great products that last longer, are more fuel efficient and are safer than ever before,” Szakaly added. “It’s always been about consumer choice and the benefits of a competitive market, and that is definitely what we have."