- The auto industry is usually thought of as a cyclical business, but the current US sales boom has lasted longer than expected.
- This has enabled a novel period of long-term strategic planning.
“The auto industry is cyclical.”
You hear that all the time in the business world. Translation: in the US, sales boom and sales bust.
Auto executives have trained themselves to enjoy the good times while they last, but to routinely choppy waters and batten down the hatches when they arrive.
Typically, the agita runs on a predictable, 12-month timetable. The year begins with a brief celebration of the previous year’s sales total (if it was good), after which the fretting commences. After a few months, the industry has enough sales data to figure out if a boom will continue, or if a bust is on the horizon.
Sometimes the bust is just a decline, driven by a short recession or some other outside economic shock, such as rising oil prices. And sometimes the bust is a mega-bust, as it was after the financial crisis when US sales fell to 10 million, a devastating event then sent both General Motors and Chrysler into bankruptcy.
The long boom
In 2015, 2016, and 2017, the US sales total came in at over 17 million. There’s a decent chance that 2018 could see yet another 17-million year, and that’s enabled auto executives to break out of the old 12-month habit.
A big chunk of those record sales has been profitable pickup trucks and SUVs, so Detroit and the other automakers selling cars in the US are sitting on heaps of cash. They have plenty of dough to ride out the crisis they’re always anticipating, so they have been able to relax and think long term.
Widespread electrification and autonomous vehicles, along with ride-hailing and sharing, are multi-decade propositions, and automakers are now planning ahead in double-digit increments, rather than simply through the next five-t0-seven-year product cycle.
It’s a fortunate historical anomaly: an extended sales cycle, cheap credit, affordable gas, and a boom in profitable vehicles. For the industry, times have been happy. They will be sad again someday, but that someday keeps getting pushed off.
So who will be the winners? Well, obviously consumers. Thanks to a market that is enabling automakers to take more risks, consumers are going to have more transportation options in the next 12 years.
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