American Honda exec says US auto sales nearing its peak

Article by Christian Andrei, on August 21, 2014

John Mendel, executive vice president of sales at American Honda, has warned that auto sales in the United States are nearing the highest point that the market could sustainably support. He also warned that US auto sales could suffer long-term damage if carmakers increasingly rely on subprime financing and seven-year loans to increase their market shares.

American Honda has seen its US market share drop to 9.1 percent in the first seven months of 2014 from 9.7 percent in the same period in 2013. Mendel noted that such decline won’t prompt American Honda it to do “stupid things in the short-term that damage the person who bought yesterday.”

He noted that extended loan terms and other strategies hurt resale values, customer loyalty and ultimately profits. He said that those are a “very, very short-term tactic” since, aside from pulling sales forward, it pulls people from used cars to new ones they couldn’t afford. Mendel remarked that the US auto market started shifting in 2013 and is now “near the top,” as sales is expected to reach at least 16.2 million units this year.

He remarked that annual sales of 16.5 million is “probably a good assumption” for carmakers to use in their near-term planning. Mendel’s comments mirrors those of several analysts as the US auto industry’s seasonally adjusted, annualized selling rate approached 17 million in recent months.

Morgan Stanley analyst Adam Jonas wrote in a July 29 report that the US auto cycle has shifted from a ‘need to buy,’ to an ‘I just want to buy’ type of consumer mindset.”

He estimated that 130 percent of North American light-vehicle production capacity take down in the recent downturn will be operational once again in 2016. He quipped that Honda is still focused on retail sales, even if that lead to a loss of market share in the US. [source: automotive news - sub. required]

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