Pub. 15 2016-2017 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 29 new jersey auto retailer W W W . N J C A R . O R G ECONOMIC Q&A  continued on page 31 providing another 14 or 15 million in sales. The vehicle segment mix will continue to favor light-truck sales, which are expected to account for 60 percent of the market in 2017, and continuing the upward sales trend. The ove r a l l e conomic out look for 2017 remai ns st rong wit h projec ted gross domestic product (GDP) growth at 2.6 percent, employment g rowt h b e t we e n 150 , 0 0 0 t o 18 0 , 0 0 0 j ob s per month, and the average price for regular-grade gasoline at less than $2 per gallon. There are some near-term areas of con- cern. Rising interest rates, ever-increasing loan terms and higher vehicle transaction prices could slow sales in 2017. N JAR : How mi g h t t he r e s u l t s o f t h e U . S . Presidential election impact the industry in the near AND long-term? Szakaly: There will be short, medium and long-term impacts for the automotive retail industry associated with the incom- ing administration. I n t h e i mme d i a t e a f t e r ma t h o f e le c t i on d ay, s t oc k ma r ke t s , gold prices and foreign currencies reacted to fear and uncertainty – not economic fundamentals. Markets bounced back pretty quickly but, in the short term, it’s entirely possible that markets will continue to f luctuate if companies take a breather on hiring and capital expen- ditures. However, the more important short-term indicator is how consumers react. People tend to spend as long as they have jobs and unemployment is at historic lows. Barring a serious bout of layoffs affecting multiple industries, economic activity will continue to slowly grow. Over the medium and longer terms, the new administration’s stated policy objec t ives, if enac ted, wi l l produce signif icant positive tailwinds. Lower corporate taxes, increased infrastructure spending, and reduced regulation across all aspects of business will benefit the industry. In the medium and long term, if increased infrastructure spending and certain tax cuts materialize under the new administration, it will mean a better long- term outlook. N J AR : How d o g l o b a l issues, such as trade and manu fac tur ing , impac t l o c a l bu s i ne s s e s l i ke dealerships? Szakaly: Generally speaking, most trade has benefited new car sales. But there are some headwinds facing the industry. A fracturing European Union and a decline in population growth in Japan and Korea are troubling for worldwide sales. For OEMs, the only truly positive mar- kets are the U.S. and China. A weaken- ing international market could cause OEM’s to face profitability issues and that could impact their investments in R&D. Those cuts in R&D could result in less new product offered in dealership showrooms. Also, OEMs facing a shrinking bottom line could resort to cutting prices in or- der to capture customers, which would impact dealership profitability as well. We are headed toward a stable market for U.S. auto sales, not a growing market. After several years of 17.5 million plus vehicle sales, pent- up demand is effectively spent. Now we will see a slowdown, but pent-up demand will increase again.