While our view that the light vehicle market would return to 16mn units in 2014 and that the light truck market would outperform still very much hold true, the strength of demand has surpassed initial expectations. Incentives and discounts during the inventory-clearing summer months, coupled with affordable credit have resulted in total light vehicle sales for 8M14 of 11.185mn units, up 5.1% y-o-y. Within that total, passenger car sales were up 1.2% y-o-y and light truck sales continue to dominate with growth of 9.0% y-o-y.
Early estimates suggest that September will be another strong month and as such we have revised our forecast for the full year upward. The passenger car element remains the same, with a projection of 2.0%. However, we have revised up the light truck forecast from 5.0% to 8.0%, with the slightly lower rate than current sales taking into account the winding down of production of the Ford F-150 before the launch of its new version, which some reports suggest will now not arrive before the beginning of 2015.
Looking beyond this point, however, we have revised our outlook downward. The growth of recent years is becoming increasingly harder to replicate in a mature market as the 'recovery' phase should technically be closed with a return to 16mn units. At the same time, the average length of auto loans being taken out is increasing, which will keep consumers locked into their existing vehicle for longer. With this in mind, we have revised down our sales forecast for 2016 and 2017 to 2.3% and 2.0% respectively.
In the heavier commercial vehicle segment, our view that strength in the freight transport sector will drive growth in demand for medium and heavy trucks in 2014 is playing out, as medium truck sales were up 10.3% y-o-y and heavy truck sales up 18.7% y-o-y in 8M14 as freight levels also achieved new highs in August. According to the American Trucking Association, the For Hire Truck Tonnage Index in August was the highest on record, surpassing...
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