US “car recession” spreads among largest automakers.
The media hoopla has been deafening. In December, “new vehicles sales” – defined as the number of new cars, trucks, and SUVs that dealers sold to their customers, including fleets – rose 3.1%. That was stronger than “expected.” And in the media reports, there was euphoria between the lines.
Automakers and dealers had certainly tried. Inventories are high, layoffs and plant closings have already been announced, and so every effort was made to move the iron and pull out the year. No incentive was spared to get the job done.
With this gain in December, total sales for 2016 edged up 0.4% to a record 17.55 million vehicles, according to Autodata. Sales of light trucks and SUVs rose 7.2% for the year, but sales of cars sagged 8.1%. Gasoline is cheap, and Americans love big implements.
Car sales at GM dropped 4.3% in 2016, at Ford 13.0%, and at Fiat Chrysler a catastrophic 33.5%! Plants that build cars were the ones mostly (but not exclusively) hit by shutdowns and layoffs. Then there was the whole to-do about Trump, Ford, and the plant in Mexico.
Alas, while some automakers posted record sales for the year, the biggest automakers were not among them. And you probably didn’t see this in the media unless you started digging through the data yourself. Somehow this one slipped by the media’s attention. Because something ugly happened in 2016, something we haven’t seen since 2009.
For ALL of the big three US automakers, plus for a number of others, sales in 2016 actually fell. For them it was the first annual sales decline since nightmare-year 2009. Here they are, in terms of the annual decline in their total vehicles sales, as measured by dealer sales to their customers (in descending order of sales):
- GM -1.3%
- Ford -0.1%
- Toyota -2.0%
- Fiat-Chrysler -0.4%
- Volkswagen -3.3%
- BMW -9.7%
- Mazda -6.7%
The sales of these seven automakers combined amounted to 11.5 million vehicles in 2016, or 65% of total US sales! And combined, their sales were down 1.5% from the prior year. So this is what Ford meant earlier this year, when it began mentioning the “car recession.”
But there were some winners too. Here are the automakers with sales gains in 2016 (in descending order of sales):
- Honda +3.2%
- Nissan +5.4%
- Hyundai +1.7%
- Kia + 3.5%
- Subaru +5.6%
- Daimler +0.1%
- Jaguar Land Rover +23.6%
- Mitsubishi + 1.0%
- Volvo +18.1%
- Porsche 4.9%
- Tesla +69% (39,975 vehicles, for a market share of 0.2%)
- Maserati 7.1% (12,534 vehicles)
- Ferrari 6.2% (2,398 vehicles)
A special word for two of the biggest winners on this list – Jaguar Land Rover and Volvo.
Jaguar Land Rover is now an Indian company. Ford, which had lost money on Jaguar every year it owned it, sold it to Tata Motors in 2008, during the Financial Crisis. It was one of the deals Ford made to stay out of bankruptcy. But look how Jaguar is doing now.
Annual sales of Jaguar Land Rover jumped 23.6%, with Land Rover sales rising 4.6% to 73,861 vehicles, and Jaguar sales soaring 116% to 31,243 vehicles. In other words, Jaguar in terms of sales growth, was the best performer among all brands, even if you never liked any car they built after the E Type.
Volvo is now a Chinese company, owned by Geely, and is selling its first China-made Volvos (the S60 sedan) in the US. Total sales jumped 18% in 2016. Volvo is not immune to the big-implement theory: its car sales fell 7%. But its SUV sales surged 30%!
The only other major automaker currently offering China-made cars in the US is GM, with its Buick Envision, an SUV with a retail sticker price north of $40,000 – on the theory, if it’s good enough for China, it’s good enough for the US.
So what’s up for 2017?
Inventories are still high for the Big Three. Car sales are the pits, and that’s not changing unless gasoline prices double, which isn’t likely. Incentive levels are already at a record and may rise further. Used vehicle wholesale prices are declining, under pressure from aggressive incentives on the new vehicle side and from surging supply of wholesale vehicles (rental cars and lease turn-ins). This will make trade-ins less valuable, and thus raise their negative equity, which will make it harder to trade, at the worst possible time, just when interest rates are beginning to rise.
Auto loans have soared in 2016, and so has the debt burden of consumers. And rising auto subprime loan delinquencies are now catching even the New York Fed’s eye, with six million Americans being 90-plus days delinquent. So 2017 is going to be a tough year for automakers.
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