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U.S. Auto Industry Crisis Looms; Blamed On Weak March Sales

By Grace Anilado , Apr 06, 2017 08:24 PM EDT
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The U.S. auto industry is on the verge of a crisis as car dealers report weak sales for the month of March. Because of that, they are pondering how this dip would affect the industry that is still coming out of its six-year recovery period.

Analysts expected that 17.7 million units will be sold this year, but they have hurriedly adjusted the number to reflect the recent slump in sales. The seasonal forecast has now been adjusted to 16.6 million vehicles. That is still a big number but is low compared to the 2016 record of 17.55 million units sold. This adjustment in the forecast does not bode well for the U.S. auto industry, considering the fact it is still gaining traction after the 2009 recession.

According to Deutsche Bank AG, the weakening car sales can possibly lead to another instance of what they call as the "triple threat." Rod Lache, Mike Levine and Robert Salmon, analysts from the financial institution wrote a note last Tuesday. Therein, they stressed the risks that the U.S. auto industry faces due to rising rates, increasing negative equity and used-vehicle price devaluation.

Deutsche Bank AG's concerns over used vehicle value are echoed by the National Automobile Dealers Association (NADA). Because the U.S. auto industry is facing a lot of vehicle returns once their leases are over, the prices for used sedans are dipping. In fact, car auctioneer Manheim foretells that about leases will end for 3.6 million vehicles this 2017. Meanwhile, the company predicts that number will be followed by 4.1 million in 2018 and 4.3 million in 2019. These returns are a wild card and affect the rigor of auto sales.

Meanwhile, big players in the U.S. auto industry are also offering their own forecasts. Ford, for example, say that 2017 sales will reach 17.7 million against NADA's 17 million prediction. On the other hand, Consultancy AlixPartners foretell that dealers and automakers will sell 17.5 million units. However, they predict a downturn for 2018 and 2019.

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