Automakers reported November new-car sales for the U.S. on Tuesday and for the second time this year, the pace came in above 17 million.
Most analysts and market observers expected a lower pace than that — something closet to 16.5 million.
It’s important to remember, by the way, that robust new car and truck sales are happening in the context of high average transaction prices — almost $US34,000 per vehicle, according to Kelley Blue Book. It’s also important to remember that many of those sales are sales of trucks and SUVs, vehicles that are extremely profitable for automakers.
Car companies doing business in the U.S. haven’t seen a year this good since before the financial crisis.
The question everyone is now asking: Will 2014 come in at or below 17 million?
The stage is set for a 17-million year, with one month to go.
There are three main drivers:
•Pent-up demand. The average age of vehicle on U.S. roads is 11 years. That’s historically ridiculous. Americans don’t drive old cars. And now, they’re getting rid of all those old cars and buying new ones.
•Easy credit. Lack of access to credit crushed the U.S. auto market in the 2009-2010 period. Five years later, banks and the automakers’ finance arms are competing for both credit-worthy customers and expanding lending to subprime borrowers.
•Cheap gas. With gas prices falling like a rock, consumers are far less concerned about a car being a big drag on monthly budgets. This is bringing them back to the larger vehicles they have always favoured. And consumers who haven’t been driving are going to start again.
At the more macro level, the improving overall economy is also contributing to surging auto sales. If you don’t have a job, you don’t buy a new car. If you have a job, you can.
What could prevent a 17-million 2014?
My pet theory is that the longtime bestselling vehicle in the U.S. could be the only factor holding us back. Ford recently revamped production for its legendary F-150 pickup truck, to be able to build it with more aluminium, reducing weight and improving fuel efficiency.
That’s crimped F-150 supply in the short term. It will recover, and of course other automakers sell full-size pickups. But if the F-150 hadn’t been revamped, I think 17 million would almost be a lock at this point.
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