Never before have so many new cars and trucks been sold in the US in a single year.
The automakers reported December sales on Tuesday and when the counting was done, 2015 set a new record.
A total of 17.5 million vehicles rolled off dealer lots. That was just enough better than 2000’s 17.4 million to set a new benchmark.
The industry was on a tear in 2015, running at or above a torrid sales pace of 18 million for much of the year.
The comeback of the US market has been stunning. Sales plunged below 10 million in the depths of Great Recession. Back then, no one was sure if there would ever be anymore records broken.
Actually, it could have been a better 2015 (still, a record is a record).
Some analysts surveyed by Bloomberg, both at consumer auto information resources such as Kelley Blue Book, True Car, and Edmunds and at big investment banks like Goldman Sachs and JPMorgan, thought the selling pace for December would pull the yearly total up close to 18 million.
But although everybody except Volkswagen, still reeling from its emissions-cheating scandal, notched gains, some car makers finished up December a bit light against expectations. At Ford, for example, US sales rose 8% in December to 239,242 vehicles, bringing its full-year total to 2.6 million (its highest since 2006). Analysts expected an increase of 11%. GM’s sales growth in December was also lighter than expected.
Ford and GM both slipped as the trading day neared a close, down about 2% and 3% respectively
Several factors contributed to the record year: an improved economy, with “full employment” achieved after the unemployment rate hit double digits following the financial crisis; cheap gas; and easy access to credit. Adding to this is the willingness of the automakers’ finance arms and banks t0 extend auto-loan terms beyond the usual five-year thresholds.
At various points in 2015, alarm bells were raised about the underpinnings of this boom. Subprime auto loans, for example, have worried market observers. Default rates, however, remain low. And the consensus among various members of the industry that I’ve spoken with this year is that sales at current levels should continue through 2016.
The average age of a car on US roads, after all, is at an all-time high: 11 years. Pent-up demand could actually take another two or three years to be fully worked through. About a million more new cars and trucks were sold in 2015 over 2014. And numerous industry observers think 18 million or more is within reach for 2016, barring a major negative economic event.
Auto sales in the US have been steadily ascending since 2009. However, everyone in the industry knows that the business is cyclical. At some point, sales will decline.
The tightrope the auto industry is navigating demands that carmakers capitalise on the boom while they can but avoid the errors of the past. They need to avoid putting too much money on the table in incentive spending, in an effort to capture market share. And they need to invest in research and development now to avoid losing consumers’ attention later with lacklustre models. Detroit must be careful about an over-reliance on big SUVs and full-size pickups.
But for now, everyone in the auto industry has a very good excuse to dance in the streets. Or turn a few well-deserved tire-smoking doughnuts!