(PRWEB) November 01, 2017
Americans’ intent to acquire new vehicles accelerated sharply in October, largely due to robust confidence in the overall economy, and enticing deals on outgoing 2017 models. TechnoMetrica’s Auto Demand Index climbed 19 points this month, to a score of 110, its highest reading since February. Thus, we anticipate that auto sales, which posted their first monthly gains of the year in September, will continue this momentum in the near future.
TechnoMetrica Market Intelligence developed the Auto Demand Index, or ADI, as a way to measure the intent of consumers to buy or lease a new vehicle within the next six months. Raghavan Mayur, president of TechnoMetrica, explained that the ADI, which is conducted monthly, is based on the response to a key question posed to more than 900 adult Americans: How likely is it that you will buy or lease a new vehicle within the next 6 months?
The Index’s strong performance this month becomes further pronounced when measuring the indicator against its long-term and short-term moving averages. October’s Index score registered above all three moving averages. The reading surpassed its 12-month average (103) by seven points, its 6-month average (97) by 13 points, and its 3-month average (98) by 12 points.
In addition, for the first time since December 2016, all three of the Index’s moving averages improved in October, indicating that vehicle purchase intent will remain strong in the months ahead.
At the same time, however, our momentum indicator (MACD) suggests that the Index, while remaining robust, will likely moderate slightly from the eight-month high reached in October. Despite a slight gain this month, the indicator persists in negative territory at -2.8. This marks the sixth consecutive month in which the momentum measure has registered a negative reading.
Accordingly, while we anticipate that new vehicle sales will continue to grow at a healthy rate in the coming months, due to rising incentives and relatively low gas prices, sales growth is not likely to exceed last year’s record pace. In fact, even with auto sales reaching a 12-year high annualized rate of 18.57 million vehicles last month, new vehicle sales have fallen nearly two percent this year.
“Fueled by a stronger economy and increased incentive spending, auto sales are likely to continue growing at a strong pace in the near future,” said Raghavan Mayur, president of TechnoMetrica. “However, after a long streak of monthly declines throughout 2017, full-year vehicle sales are not expected to match last year’s record of 17.55 million new vehicles.”
This month’s rise in vehicle purchase intent extends across most demographic groups. Of the twenty-three segments that TechnoMetrica tracks on a monthly basis, 21 showed improvement in the Index this month. Purchase intent grew most significantly among Midwestern Americans (+21), consumers residing in the Northeast (+16), urban residents (+15), and the African American/Hispanic segment (+15). Overall, eleven groups posted Index readings above 100 this month, with parents, consumers earning an income of $100K or more, and drivers aged 25 to 44 reporting the highest levels of purchase intent.
This month’s rise in purchase intent reflects Americans’ strong optimism regarding the overall economy, and robust confidence in their own financial circumstances. The IBD/TIPP Economic Optimism Index, our monthly measure of U.S. consumer sentiment, has registered a score in positive territory (above 50) for every month this year, largely due to growing confidence in the labor market, as well as the stock market’s record-breaking performance. Consumers are also highly upbeat about the outlook for their personal finances, as economic growth becomes more tangible in the everyday lives of Americans. For instance, our Personal Financial Outlook measure, a component of the Economic Optimism Index that gauges how Americans foresee their own financial situation in the near future, attained a robust score of 59.5 in October.
In addition, prospective buyers are being lured by more generous discounts, as automakers accelerate incentives on outgoing models. Last month, average incentive spending rose 21 percent, to an all-time record of $3,506 per-vehicle, according to the automotive information platform Edmonds. Car deals and incentives typically abound this time of year, as automakers try to help dealers clear their lots in preparation for new vehicle models.
Recent weather conditions may also be lifting purchase intent levels among consumers. Demand for new vehicles has increased in areas hit hardest by Hurricanes Harvey and Irma, as residents begin to replace vehicles damaged or destroyed by the storms. Up to 500,000 vehicles are estimated to have been damaged or destroyed during Hurricane Harvey, while 200,000 were flooded by Irma. Thus, vehicle purchase intent should remain especially strong in the southern U.S. in the months ahead.
Meanwhile, the unseasonably warm weather in the Northeast this Fall has fostered favorable conditions for new vehicle shopping. It is not surprising, therefore, that the Index score for consumers residing in the Northeast climbed 16 points from September, to a reading of 106.
Each month, the Auto Demand Index also provides key insight into the brand preferences among prospective buyers. This month, Toyota claimed the top spot in brand choice, garnering a 15% share of consumers. Ford, the preferred choice among 14% of likely buyers, gained one position to take second place. Chevrolet, which was Americans’ most desired brand last month, fell to third place in October, with a 12% share of consumers. Rounding out the top five in consumers’ favorite brands were Honda, which dropped from 12% to 10% this month, and GMC, which remained unchanged at 5%.
Consumers favor American-made vehicles over import brands, according to our study. Preference for vehicles made in the U.S. climbed ten points from September, to a share of 46%, its highest level since March. More than two in five prospective buyers (43%) intend to acquire Asian vehicle brands, while less than one-in-ten (7%) plan to purchase European brands.
Regarding the types of vehicles consumers intend to acquire, mid-size vehicle remains the most preferred vehicle type among consumers. More than one in five Americans likely to acquire a new auto in the coming months plan to choose a mid-size vehicle for their purchase. Consumers are also showing strong preference for pickup trucks and small SUVs, as both vehicle types captured a 15% share of likely buyers this month.
Each month, TechnoMetrica uses Random Digit Dial telephone methodology to conduct live interviews with more than 900 respondents, using both landlines and cell phones. The margin of error for the survey is +/- 3.2 percentage points. In addition, recent statistical analysis has shown a strong correlation between the Auto Demand Index and actual U.S. vehicle sales.