Continued weakness in the sales of U.S. autos will keep a lid on the sector for up to 18 months according to Moody’s Investor Service.
In a report Tuesday, Moody’s claimed that U.S. auto sales will shrink 3.6 percent in 2017 and by 0.6 percent next year as low-cost lease deals prove harder to find.
“While steady global GDP growth will drive a bigger demand for cars in key markets like China, Japan, and India, we expect U.S. car sales to weaken and slow the speed of growth for the automakers sector globally to less than 2 percent into 2018, and so our sector outlook remains negative,” said Falk Frey, Senior Vice President at Moody’s.
According to Autodata Corporation, total vehicle sales in the United States decreased to 16.14 million in August from 16.77 million in July.
U.S. auto sales have been on a downward trajectory since December 2016.
The Moody’s report added used car prices should fall as large numbers of vehicles come off lease but noted that demand for new vehicles could be supported by the destruction caused by Hurricanes Irma and Harvey.
China is also predicted to see a cooling of auto sales. Moody’s says Chinese auto sales will grow just 3 percent this year and 2 percent in 2018 as a tax cut on purchases of small engine passenger vehicles comes to an end.
However, the report noted that China’s low vehicle penetration rate and continued economic growth could return auto sales to high single-digit growth over the next five years.
In Europe, the transition away from diesel is expected to aid demand.
“Western European auto sales will grow 2 percent this year on the back of improving demand in Germany, where automakers such as BMW, Volkswagen, and Daimler have been offering consumers incentives to trade in older diesel vehicles for less polluting ones,” added Frey.
Japan and India have healthier outlooks from the ratings agency with Japanese consumers expected to boost car sales by 5.7 percent in 2017 as Nissan offers a new range of small cars.
For India, car sales look set to grow a bumper 9 percent this year and 7 percent in 2018 as a new tax regime forced manufacturers to cut prices.