New car sales expected to cool in Sept. causing further slide in Q3

New vehicle sales are forecast to fall this quarter as consumers continue to wait for better conditions in the market.

Driving the news: Q3 was a particularly eventful period for the U.S. car market, starting in the wake of the CDK Global cyberattack and marking the first of the Federal Reserve’s long-awaited interest rate cuts. With a tumultuous presidential election cycle roiling in the background, the uncertainty of recent months seems to have had a cooling effect on new vehicle demand, although its impact was relatively slight.

• Edmunds expects a Q3 sales total of 3.9 million units, 2.3% lower than last year and 4.7% lower than the previous quarter.

• Most car manufacturers are set to come in below their 2023 numbers. Stellantis leads the pack with an estimated sales decline of 10.5% followed by Toyota’s 4.7% drop.

• Honda and Ford are both expected to improve over last year, scoring respective increases of 9.9% and 1.1%. Honda is also the only brand to see an improvement on a quarter-over-quarter basis (up 4.6%).

• Jessica Caldwell, Edmunds’ Head of Insights, attributed the quarter’s weaker numbers to ongoing affordability challenges, which are keeping many consumers at home.

Behind the scenes: These numbers are more complicated than they may seem at first glance. With such a volatile quarter, each brand’s performance over the last three months can be attributed to wildly different factors.

• For instance, Toyota’s sales decline, while surprising given its success in recent years, can be attributed in part to the stop-sale of several high-profile models.

• Comparing sales to last year doesn’t tell the whole story either. While it led its competitors in year-over-year declines, Stellantis had the smallest drop on a quarterly basis, a potential sign its recent spurt of policy changes are slowing its losses in the North American market.

Zooming in: September saw particularly weak sales, ending the quarter on a low note. However, the picture is complicated somewhat by the timing of the Labor Day weekend, which came at the end of August rather than the start of this month.

• Cox Automotive expects to see September sales drop 11% year-over-year by the end of the month, resting at 1.19 million units. That’s down 16% from August.

• On the other hand, August was a particularly strong month, benefiting from an atypical calendar. J.D. Power President of Data and Analytics Thomas King notes that August and September sales combined show an increase of 2.6% year-over-year.

• This suggests that the market is behaving relatively normally for this time of year and is even slightly better off than at this point in 2023, despite the apparent downshift in monthly sales.

Bottom line: Overall, sales are down following a complicated series of months for the American car industry. Incentive levels have risen but not fast enough to open the floodgates of new vehicle demand. Meanwhile, automakers and dealers are grappling with a range of unique challenges, impeding their growth efforts. But although the last few months have been plagued with uncertainty, the rest of the year should offer much more clarity for all sides of the market, bringing a close to the election cycle and setting the tone for the Federal Reserve’s interest rate policy for 2025.

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