Imports hit ‘sweet spot’ as total number of vehicles in operation rise, new vehicle sales decline

More import vehicles, between year model 2006 and 2012, are on U.S. roads than domestic vehicles, according to Experian Automotive. A total of 51.5% of vehicles in operation in this period are imports.

This is the first time import vehicles have taken the majority of market share in this period, known as the sweet spot, said Marty Miller, senior product manager for Experian. In a recent video, Miller explained trends in light-duty vehicles in operation in the United States and globally.

Vehicles in the sweet spot are no longer covered by the manufacturer’s warranty and require more service or replacement parts. Miller expects the volume of imports in the sweet spot to continue to rise. Maine has the highest concentration of vehicles in this spot, followed by other states in the Northeast and sweeping west to Texas.

“It’s almost as if the eastern part of the U.S. has the highest propensity of sweet spot vehicles over the western part of the U.S.,” Miller said.

While the total number of vehicles in operation has risen to 286.5 million, those in the sweet spot have decreased since 2013. This quarter, the total number of sweet spot vehicles has fallen to 84.9 million, from 85 million last quarter.

“We expect volume of sweet spot vehicles to lower a little more this year, and then begin to climb out next year at this time thanks to the increase in new vehicle sales that have occurred since the Great Recession,” Miller said.

Over the past year, 42.2 million used vehicles have changed ownership, Miller said.

“Of all vehicles on the road today nearly nine out of 10 vehicles fall within the current 20 model years.”

In the first quarter of 2017, the average age of all vehicles has risen to 11.5 years, from the same period in 2016. When looking at the past 20 model years, the average age has fallen to 9.67 years, from 9.71 years in 2016, because of the rise in newer vehicles entering the market, Miller said.

The total number of vehicles in operation is expected to rise to 289 million by 2019, he said. This estimate could vary between 270 million and 311 million, but the vehicle market size should grow over the next few years.

As far as market share, 23.9% of operating vehicles were manufactured by General Motors, down from 24% last quarter. Ford has 17.7% and Toyota, 13.5%.

“Most manufacturers remained flat from last quarter, but a few gained share,” Miller said.

By vehicle type, the pickup continues to lead market share, at 15.2%. The mid-range vehicle slipped slightly to 11%, and the economy car is flat at 9.2%. The share of hybrid/electric vehicles has risen to 1.68%.

Globally, more than 1.2 billion vehicles are in use. The United States has nearly twice as many operating vehicles than China, the country with the second most vehicles in operation. Japan, Germany, Russia and Brazil round out the list of top six countries for vehicles in operation globally. Manufacturers with the most vehicles in operation are Toyota, Volkswagen, General Motors, Ford and Hyundai and Kia. Top brands with vehicles in use are Toyota, Ford Chevrolet, Volkswagen and Honda.

USED VEHICLE PRICES
In May, wholesale prices of used vehicles up to eight years old fell 1.9%, according to J.D. Power Valuation Services. Its seasonally adjusted used vehicle price index rose 0.8% to 111.1, from April, but declined 7.6%, from 120.2 in May 2016. Auction sales of the used vehicles fell 3% to 366,212 units in May, from April, but rose 1%, from 360,394 in May 2016.

In June, wholesale prices of the used vehicles are expected to fall 1.9%. For 2017, prices are projected to decline 6%. Trade-in values declined 1.6%, according to the June edition of NADA Official Used Car Guide.

New vehicle sales have fallen for five consecutive months, down 0.6% from May 2016. Manufacturers have increased incentive spending for 26 consecutive months. Spending has risen 11% to $3,510 per vehicle compared to $3,138 in May 2016, according to Autodata. Broken down by brand, Ram spent the most at $5,783, while Subaru, the least at $955 per vehicle.

Vehicle supply fell eight days to 68 days in May, from April. In May 2016, the supply was 59 days, according to Wards Auto.

NEW VEHICLE SALES DECLINE
Sales of new vehicles are projected to decline nearly 4% to 1.46 million units in June, from the same month last year, according to Kelley Blue Book. This will result in a seasonally adjusted annual sales rate of 16.3 million.

“With manufacturers continuing to announce production cuts at their plants following weaker consumer demand, it all but solidifies 2017 as a down year,” said Tim Fleming, analyst for Kelley Blue Book. “We are also seeing lease penetration rates come down from record highs and starting to see a slowdown in the growth of incentives as a result. Both are good signs for the long-term health of the automotive industry and show manufacturers’ commitment to profitability and preserving future used-car values.”

The June decline would be the fourth consecutive month of an annual sales rate of less than 17 million vehicles. For 2017, sales are projected to be between 16.8 million and 17.3 million units, representing a 1% to 4% decline from 2016. Retail sales should account for 79.7% of all sales in June, an increase from 79.4% in June 2016.