JD Power and Associates has forecast new light vehicle sales in the United States to drop to 14.2m units in 2008, a 12% fall from 16.1m in 2007.

The revised forecast revision - a cut of 750,000 units from 14.95m projected earlier this year - was prompted by a deteriorating economic environment, prolonged effects wrought by the credit crisis, elevated fuel prices and a reduction in the daily rental fleet market.

Fleet sales are seen dropping to 2.6m units - a 21% decrease from 2007. Retail sales, which reflect consumer behaviour, are expected to decline 10% to 11.6m units.

"While the sluggish economy is the primary driver of the reduction in retail sales, fleet sales are expected to experience an even steeper decrease from 2007," said Jeff Schuster, JDP's executive director of automotive forecasting. "This trend indicates that the automotive industry is making serious efforts to continue reducing fleet sales, while also allowing retail sales to work through the downturn without heavy use of incentives."

Although sales for smaller vehicles are rapidly increasing, the growth rate of smaller vehicle segments has not been enough to offset significant declines experienced in large vehicle segments.

Retail sales for the compact basic segment from January to June 2008 were up 28% compared with the first half of 2007. In contrast, sales in the first half of 2008 for all vehicles in the large segments - which include large pickups and SUVs - were down 26%, compared with the same time period in 2007.

New vehicle sales for smaller cars have also been constrained by a thinning supply. Days to turn for the compact basic segment averaged 57 days from January to June 2008. However, days to turn decreased sharply to average 47 days from May to June. By contrast, days to turn for the large pickup segment averaged 85 days from January to June 2008, but increased to 95 days from May to June.

"The weak performance seen in June 2008 is expected to carry over into July, and year-over-year comparisons mark June as the weakest month on a seasonally adjusted annualised rate since 1993," said Schuster.

Total light vehicle sales in July are forecast to sink below a seasonally adjusted annualised rate (SAAR) of 13.6m units - down 2% from June 2008 and 12% from July 2007. Transaction data to date for July indicates that retail sales are down 21.6% (selling day adjusted), suggesting that poor sales performance in June was not simply an abnormality, but a continuation of a downward trend that may continue into the balance of 2008.

"The economic stress and uncertainty that consumers may face over the next six to 12 months will likely result in a continuous period of slow new vehicle sales," said Schuster. "It is also unlikely that a pronounced rebound will occur in 2009 and conditions could actually worsen before they improve."

JDP has projected a slight sales improvement to 14.3m units in 2009, with an increase in retail sales to just 11.7m units while fleet sales remain essentially unchanged at 2.6m units.