Post-peak US sales still historically strong, thanks to SUVs

US light vehicle sales in October maintained a historically strong pace but reflected a slowdown from the unusually high September total, which was boosted by replacement demand from the hurricanes in Texas and Florida. Kelley Blue Book estimates the seasonally adjusted annual rate (SAAR) at 17.9 million units, while both IHS and General Motors put it closer to the 18 million unit range. That compares to September's SAAR of 18.5 million units. "October was a very strong month but confirms the fact that September saw robust gains driven by hurricane recovery efforts," observed Alec Gutierrez, Senior Analyst for Kelley Blue Book. October may have seen some delayed sales activity from the hurricanes, but it was decidedly muted. Ford estimates the boost to its sales from the natural disasters at about 2,000 units for October - one-third of what it saw in September. "With Harvey we saw immediate replacement demand, as most of the cars were flooded. We saw less of that activity in October," Ford's Mark LaNeve, Vice President, US Marketing, Sales and Service, told analysts. Michelle Krebs, Executive Analyst for Autotrader, emphasised the strength of the market from a historical perspective. "At the very beginning of the year we called this the post-peak era. We knew we wouldn't set another record. We are seeing signs of that in slowing to flat ATPs (average transaction pricing), incentive growth and inventory growth. But it shouldn't be lost on us that this is a pretty strong market. If we hit the 17 million number this year, it will only be the fifth time that's happened." Many industry watchers and players have flagged the continued strong economic indicators, including robust consumer confidence, low unemployment and low fuel prices. "From an overall environmental standpoint, with industry dynamics, what needs to be up is up and what needs to be down is down," said LaNeve. "The stock market is up - that helps the psyche of our buyers. The age of the car park is relatively high at 11.56 years. Housing is up - those are all great." Years of record sales and leasing While the overall landscape remains supportive, growth predictions remain subdued. Not only has the industry been running at record levels for many consecutive years, but it also faces the consequences of record levels of leasing and rising prices. "Those nearly new vehicles are coming back on the market and will compete for some of the new car sales," warned Krebs. "Also there's an affordability issue. Wages have not kept pace with the price of cars - the ATP is about US$35,000 now. Used and nearly new offer an alternative to people with affordability issues." Gutierrez backed that up, adding: "The potential for new car sales to hit 18 million, 19 million, 20 million units will always be a challenge when they are so expensive for most." He points to the quality and durability of cars built over the last few years and the millions of models already on the road. "From a supply perspective, there are plenty of cars to go around to support the used car market. It will be a challenge for dealers and OEMs to push new cars when there are so many great used cars on the same lot at a discount," he said. Like Krebs, Gutierrez expects certified pre-owned vehicles to take a greater share of the overall market in the years to come because of all the lease activity. 'Breathtaking decline' for cars October maintained the long-running segment shifts away from passenger cars into SUVs and light trucks, prompting questions of where the balance would eventually settle. By Ford's calculations, passenger cars accounted for 53% of the total vehicle market, including medium and heavy trucks, back in 2009. Today it estimates the segment stands at 35%. Ford's LaNeve described the market share loss among passenger cars as "a breathtaking decline in a relatively short window," adding: "Much of that decline is permanent. SUVs offer great fuel economy and ride quality and customers just seem to prefer them." Kelley Blue Book similarly estimates that SUVs account for 34-35% of today's light vehicle market, with non-luxury passenger cars taking a 30% share. Ten years ago, those figures stood at 23% and 40%, respectively. "The question becomes whether we will see a wholesale shift of non-luxury cars down to 20% and SUVs up to 40%. I don't know that there will be a 100% flip from where we were at 2007," Gutierrez told Automotive World. "There is room for SUVs to continue to gain share, as seen so far this year." This year has seen mid-size cars decline more than any other segment while compact SUVs have risen faster than any other segment. Gutierrez sees potential for the overall share of non-luxury SUVs to reach 37% or even 40% in the next year or two but doesn't necessarily expect non-luxury cars to bottom out to 20%: "We could see cars drop three or four basis points from today's 30%. It is hard to say where this will stabilise but there is room for this trend to continue."

Post-peak US sales still historically strong, thanks to SUVs

Despite slowing to flat ATPs, incentive growth and inventory growth, the US light vehicle market could still top 17 million units this year. That's only happened four times in history, writes Megan Lampinen

M:bility | Magazine – coming soon

Special report: The future of mobility in Helsinki

Special report: The evolution of the electric bus

The automaker data book – Q2 2018

How co-simulation enables efficient automotive product development

M:bility | India

M:bility | California

M:bility | Europe

M:bility | Detroit

Monthly Briefing – August 2018

M:bility | Detroit

Grasp the future of mobility

12-13 March 2019
Dearborn, Michigan

M:bility | Europe

Grasp the future of mobility

9-10 July 2019
Stuttgart, Germany

M:bility | California

Grasp the future of mobility

17-18 September 2019
Santa Clara, CA

M:bility | India

Grasp the future of mobility

26-27 November 2019
Pune, India

It’s time to log in (or subscribe).

Not a member? Subscribe now and let us help you understand the future of mobility.

Single-User Site License

Team Site License

Enterprise Site License

Email Alerts

Related Content

Log In

Single-User
Site License

Team
Site License

Enterprise
Site License