NADA’s leadership is bullish on the new-car market despite economic concerns that could compel some buyers to opt for pre-owned units. Photo by htmvalerio
TYSONS, Va. — In a Wednesday-morning conference call with members of the automotive press, the National Automobile Dealers Association (NADA)’s chairman, Chicago-area dealer Mark Scarpelli, and its chief economist, Steven Szakaly, predicted new-vehicle sales would remain above the 17 million-unit mark in 2017.
Throughout the quarterly briefing, Scarpelli and Szakaly cited a number of factors working in the industry’s favor, including continued strong demand for new vehicles — particularly in the SUV and pickup segments — and new technology.
“One area that does not get enough attention is demand for technology and safety,” said Scarpelli, president of Raymond Chevrolet and Raymond Kia in Antioch, Ill., and co-owner of Ray Chevrolet and Ray Chrysler-Jeep-Dodge-Ram in Fox Lake, Ill., noting that his customers are seeking vehicles equipped with the “latest and greatest safety features,” including collision avoidance technology, which is developing “very rapidly.”
On the economic front, Szakaly listed a number of factors, both positive and negative, that are affecting dealership profitability. He expressed hope that Federal Reserve-ordered interest hikes and modest wage growth would be offset by increased customer incentives and the buying power of high-wage earners.
“While these headwinds will not have much of an impact on new-vehicle sales, they are a sign of a flat market as we look at the rest of 2017 and next year,” Szakaly said, adding that a glut of off-lease units and stretching loan terms, in combination with rising interest rates, could push some new-car buyers toward the used-car lot.
Both men praised dealers for finding new sources of revenue and lead generation. Szakaly said the NADA has tracked “tremendous growth” in service performed by franchised dealership, noting that, since 2010, the number of express service repair orders has doubled, repair orders for warranty work (including recalls) are up by six million, and customer-pay ROs are up by seven million.
Asked whether any decrease from the record 17.5 million new units sold last year would represent a cyclical retrenchment or a prosperous plateau, Szakaly said that, despite the aforementioned economic headwinds, the latter is far more likely.
“I don’t see sales collapsing anytime in the next few years,” he said.