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US auto sales to shrink between 2019 and 2020

S&P Global Ratings expects U.S. light-vehicle sales to decline by about 1.2% year over year in 2019 and 2020.

However, the rating agency expects the sales to stabilize at a relatively healthy annual rate of between 16.6 million and 16.8 million units.

S&P also raised its annual light-vehicle sales forecast for 2018 because light-vehicle sales for the first half of 2018 were slightly higher than S&P's previous annual forecast, propelled by fleet sales and greater incentives. Sales are now estimated to be 17 million units from 16.9 million units previously.

The rating agency believes demand growth will likely lose traction over the next 12 to 18 months.

U.S. auto sales for June hit a seasonally adjusted annual rate of 17.4 million units. The rate has averaged about 17.1 million units in the first half of 2018.

The forecast is based on S&P's expectation for steady U.S. GDP growth, housing starts, gasoline prices, increase in demand due to the fairly high average age of light vehicles on the road and U.S. tax reform.

The rating agency also expects marginal year-over-year contraction through 2020 arising from the reduced availability of auto credit, falling used-car prices, rising interest rates, and less favorable lease options.

Overall, S&P does not expect the decline in auto sales between 2019 and 2020 to affect credit ratings.

The U.S. recently imposed tariffs on steel and aluminum on countries, such as Canada, Mexico, and the EU. S&P said the threat of additional tariffs on Chinese imports has yet to dent the broader U.S. economy in any assessable way.

Meanwhile, the rating agency said that it expects the combined share of U.S. electric vehicles to remain under 2% despite some improved sales for the Tesla Inc.'s Model 3, the new Leaf by Nissan Motor Co. Ltd., and Honda Motor Co. Ltd.'s Clarity, which resulted in some share losses for other competitors in alternate fuel segments.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.