The Fiscal Cliff a Real Danger to the Future of Car Sales

Although the auto industry in the US will end 2012 on a strong note analysts predict 2013 will have a rocky start due to the failure to fix the ‘fiscal cliff’ impasse.

J.P. Morgan expects the impact of Hurricane Sandy and the sluggish demand to lead to a seasonally adjusted annualized selling rate of 15.4 million vehicles in December, still an increase of 14% compared with the same period last year.

“December can be a more challenging month to forecast, as roughly 50 percent of sales typically fall between Christmas and New Year’s,” said analyst Ryan Brinkman in a note Wednesday. “(But) all of our channel checks point to strong and strengthening demand into year-end.”

Ryan Brinkman added that this is the case for GM’s full-size pickup trucks, which seem to gain market share due to increased incentives, after losing share last month on lower incentives. Ford and Chrysler are expected to announce strong pickup sales too. But the rally in automaker shares might be put in jeopardy if an agreement is not reached to avert the tax increases and spending cuts which are to go into effect on January 1st.

According to a recent survey on 2,500 drivers from the US, the fiscal cliff will significantly affect their car-related spending. More than 26% of them said they would get rid of their vehicle and car payment if taxes increase, 78% said they would forgo regular car washes and 59% said they would reconsider the necessity of a navigation system on the next vehicle they purchase.