By Jim Cunningham
While 2016 may not have ranked among everyone’s favorite year, for most of the nation’s automotive dealers, it was indeed–as Frank Sinatra once sang—‘a very good year.’
In fact, 2016 will go down in the history books as the best year ever on record for US auto and truck sales. What makes that fact even more impressive is that 2016’s record sales come directly on the heels of the record-breaking auto sales pace set during the previous year; in 2016, US vehicle sales totaled 17.55 million, surpassing the previous year’s record of 17.47 million. Last year also marked the seventh consecutive year-over-year increase in US auto sales.
Still, amid the justifiable celebrations among auto dealers of 2016’s record-shattering sales numbers, some potential storm clouds loom ahead. And as the nation’s housing sector was reminded during the last recession only a few years ago, Isaac Newton’s Law of Gravity remains in force, and what goes ‘up’ does—eventually—also have to come down. By its very nature, business is cyclical—and the auto industry is most certainly no exception to that rule.
That reality is evident in many places, including a prediction by the National Automobile Dealers Association (NADA) who is predicting that in 2017 US auto sales are expected to decline to 17.1 million vehicles; that level of automotive sales would certainly still be considered as ‘healthy’, however it would denote the first year in recent memory that the directional arrow for future sales no longer points upward.
Industry experts agree that there are several contributing factors affecting the expected level of auto and truck sales over the next 12 months.
The most significant among those factors include:
- multiple, expected hikes in interest rates
- increases in the price of many vehicles
- an increase in the number of cars that will have expiring leases, which could dramatically affect the used car sales market
- the fact that many auto buyers have opted for longer term loans, which could delay the purchase of their next new or used car
In addition, another unknown that could factor into auto sales this year is the arrival of a new Administration in Washington; as a candidate, incoming president Donald Trump threatened to impose a 35% tax on vehicles made in Mexico and exported to the US. Industry watchers believe that such a move could also have a significant impact on US auto sales.
In terms of 2016 sales, many of the nation’s auto companies saw their sales levels reach a plateau; while Nissan Motor Company saw its US sales rise by 5% last year, Subaru set a new record for sales with an increase of 6%, and Honda sales were up 3% in 2016, other companies experienced different results. Ford Motor sales increased less than 1% last year, Fiat Chrysler sales were flat, and General Motors actually saw sales decline by 1.3% in 2016.
Another major factor affecting auto and truck sales were the multitude of special ‘deals’ offered by many car companies. While incentives varied by OEM, somewhere quite generous—according to Autotrader, Ford Motors offered as much as $13,000 off of its C-Max hybrid in December. Should automakers decide to reduce incentives this year, that move could also significantly impact 2017 auto and truck sales.
In recent years, the auto industry has been at the forefront of the resurgence of the overall US economy.
In 2017, many industry observers will be watching closely to see if auto and truck sales can continue to break new sales records, or if the Law of Gravity will finally begin to have its affect on the nation’s auto industry.