‘Minimal’ Impact Expected From Interest-Rate Hike

TRAVERSE CITY, MI – Although most economists predict interest rates to rise 0.5-1.0 percentage point early next year, there’ll be a “minimal impact” on auto sales, Jeff Schuster, senior vice president at LMC Automotive, says Tuesday at the Management Briefing Seminars.

Schuster expects U.S. light-vehicle sales to reach 16.3 million this year, rising to 16.7 million in 2015 and 17.5 million by 2021.

The outlook for North America and Asia remains strong into 2021, he says, with Western Europe continuing to mount a comeback. However, the future for Eastern Europe is cloudy as tensions escalate between Ukraine and Russia, he points out.

Problems in emerging markets and South America suggest declining sales in those areas, Schuster says.

Still, he sees overall annual global sales rising from 87.3 million this year to 110 million in 2020.

The U.S. market is bolstered by gains in the housing sector and stock market, he says. SUVs and CUVs, which now account for a combined 28.2% of the total, are expected to continue rising at a slow rate. That’s also true of the premium segment (now 12.2%), with the midsize group (15.4%) losing ground.

Schuster says major trends affecting sales include downsizing by premium brands; a rise in younger buyers; efforts to establish brand images in an increasingly fragmented market; and the drive by automakers to reach tougher new fuel-economy standards.

Among the “unknowns” ahead are how Millennials (born between 1978 and 1994) will impact the market, Schuster says, adding, “They aren’t moving away (from home), but don’t push the panic button.”

Coming next is “Generation Z,” those born since 1995. Schuster has no forecast on how this group will view car ownership but observes they are more Internet-connected and individualistic and shape up as “non-conforming buyers.”