Cox Automotive Commentary: 2019 U.S. Auto Sales

UPDATE, Jan. 3, 2020 — Even though December U.S. auto sales came in below forecast, it still appears we will finish near 17 million. With sales reporting day mostly in the rearview mirror, Cox Automotive industry analysts and experts share their thoughts on some of the headlines of the U.S. automotive industry from December sales and the last year.

From Charlie Chesbrough, senior economist, Cox Automotive:
With December sales numbers coming in softer than forecast, the 17.0 million mark is within reach, but just barely. The shorter selling period this December, one less day than last year, coupled with the late Thanksgiving holiday, didn’t provide a lot of shopping days. In addition, it appears there was some pullback in fleet activity at the end of the year, particularly from Nissan which saw a steep and unexpected year-over-year decline in December. General Motors finished ahead of our full-year forecast, and we believe Ford beat our forecast as well, finishing the year down roughly 3% versus 2018, better than our forecast drop of 3.4%.

From Michelle Krebs, executive analyst, Autotrader:
On RAM: In recent years, Jeep has carried the day for Fiat Chrysler. In 2019, however, it was Ram that helped the automaker keep sales from falling more than the overall industry. Ram grabbed headlines in 2019 for stealing the No. 2 sales spot for full-size pickup trucks from Chevrolet Silverado. Total Ram pickup sales, which include the new and previous generations models, fueled in part by beefy incentives, were up an amazing 18% in 2019. It will be interesting to watch what happens to Ram sales in 2020 when FCA ends production of the previous model.

On Jeep: In a year when the SUV was king, Jeep sales fell largely due to “cheap Jeeps” — Compass, Renegade and Cherokee — that appeal to a younger, more credit-challenged audience, which saw their subprime auto loan rates rise despite a lower fed rate. The Gladiator pickup gave the brand a boost in both excitement and numbers, and the aged Jeep Grand Cherokee held its own, with a new one coming this year.

On FCA: While the strong American brands Ram and Jeep delivered in 2019, the other FCA brand posted dismal sales. Sales of the two Chrysler products — minivans and the 300 sedan — were down 23%. All Chrysler models — as well as some Dodge models — are made in Canada, where union negotiations take place in 2020, which will be a story to watch.

Fiat, which is dropping some models, was down 41%; Alfa Romeo, which was intended to be a global pillar for the company, was down 43% in 2019. Dodge slipped 9%, with only the aged Durango and Challenger posting an increase.

On GM: No doubt the 40-day strike by the UAW against GM had an impact on the fourth quarter, yet GM still closed the year down roughly aligned with the overall industry.

Even before the strike, however, the big story was the struggling Chevrolet Silverado losing the No. 2 spot in full-size pickup truck sales to Ram. Look for more brawls between the two in 2020, as GM fully launches all of its Chevrolet and GMC truck lines and Ram ends production of the previous model that it had been selling alongside the new one.

In 2019, GM followed the industry trend of dropping car models and added new SUVs. And it will be more of the same in 2020, particularly with Buick, as the brand drops slow selling cars from its line.

From Akshay Anand, executive analyst, Kelley Blue Book:
As we expected in 2019, Tesla’s story rapidly shifted to the Model 3. As their first mass market vehicle, the Model 3 is the key to Tesla’s future. Sales and deliveries were strong in 2019, but there is still the question of how Tesla can find profitability to match its lofty sales success. In addition, the ownership and reliability experience for thousands may well shape Tesla’s future purchasing and loyalty habits. Time will tell, but expect the heavy scrutiny and watchful eyes to continue in the year ahead.

From Karl Brauer, executive publisher, Autotrader and Kelley Blue Book:
Tesla acknowledges “vehicle deliveries represent only one measure of the company’s financial performance,” but for now, that one measure continues to be enough to keep investors happy. The company stock price is at an all-time high. A total of 367,000 vehicle deliveries in 2019 is noteworthy — a record for the company — but still well off the 500,000 rate Elon Musk predicted a couple years ago, and 112,000 deliveries in Q4 is well off the 500,000 “annualized production rate at the end of 2019” Musk called for last February. With that track record, we’ll see if the all-new Chinese plant can live up to the “5,000-a-week” rate Musk set as its goal.
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Commentary below was originally published on Dec. 23, 2019.

From Jonathan Smoke, chief economist, Cox Automotive:
In 2019, the U.S. economy continued to see slowing growth that started in the back half of 2018 as tariffs and trade uncertainty caused manufacturing, exports and business investment to turn into drags on GDP. The consumer stepped up to keep the economy growing, as consumer spending accounted for 90% of real GDP growth in 2019. Consumers tapped a record amount of non-housing debt to keep spending on big ticket items, including automobiles, and that debt started to show signs of worry through rising severe delinquencies and defaults as we reached the end of the year. Consumers also started to become less enthusiastic about the future as the political climate heated up. Retail spending growth began to slow as we entered the fourth quarter. Collectively these trends suggest that the consumer may not be capable of single-handedly carrying the economy in 2020, which is why we are expecting another decline in new-vehicle sales.

From Charlie Chesbrough, senior economist, Cox Automotive:
Strong December sales are critical for the industry, and December sales have been hot in recent years. Sales volume this month is likely to be just enough to lift the market above 17 million units for the fifth consecutive year, down from 2018 but slightly above the 16.8 million sales we forecast back in January. Cox Automotive is predicting sales to reach 1.58 million in this final month of 2019, above the 1.55 million needed to reach the 17-million milestone. There is one less selling day in December 2019, however, so a year-over-year sales volume decline is expected.

From Zo Rahim, manager, economic & industry insights, Cox Automotive:
2019 will be a record year for fleet sales. A healthy economy fueled by consumer spending growth and favorable tax law boosted commercial and rental fleet channels. The commercial fleet channel was consistently the strongest part of the fleet market in 2019. While the fleet business was strong for most of the year, sales cooled in the fall which suggests the overall market has peaked heading into 2020. While elevated at record levels, current inventory size and wholesale trends suggest the overall fleet market will stabilize, but not grow significantly, next year.

From Karl Brauer, executive publisher, Autotrader and Kelley Blue Book:
The big growth in 2019 came from brands successfully responding to the market’s seemingly insatiable demand for SUVs. The best examples are Hyundai and Kia, two brands that were struggling to supply SUVs just a few years ago but have now fully embraced this segment. The Hyundai Palisade and Kia Telluride are the new players this year, and both are receiving widespread accolades and delivering strong sales. But previous models, including the Hyundai Kona and Kia Niro, were already bolstering the brands’ appeal with SUV shoppers.

While 2019 was strong for most brands, one big exception was Nissan and its premium brand, Infiniti. With nearly every model down in sales this year, many of them by double digits, Nissan will need a big turnaround in 2020 just to get its head above water in terms of sales and market share. Nissan proves again: A long period of heavy incentives and fleet sales, followed closely by high-profile turbulence in leadership, isn’t the best recipe for brand or financial health.

From Brian Moody, executive editor, Autotrader:
While car share seems to be stuck well below 30% now, I suspect the segment will have a slight resurgence in popularity in the coming decade. The truth is, the teenage kids of SUV owners won’t want SUVs, just like GenXers didn’t want station wagons. Younger buyers aren’t interested in the cars their parents drove, which is a hopeful opportunity for the car segment. Eventually, consumers migrate from the norm. And cars are hardly dead. Great sedans from Honda, Hyundai, Nissan and Toyota did well enough this year and drew in some buyers who moved away from the virtually-car-free Ford and Chevy dealers. As long as there are excellent sedans, there will be sedan buyers.

From Michelle Krebs, executive analyst, Autotrader:
Pickup trucks were a hot segment in 2019 due to a strong economy, low unemployment and business depreciation benefits from 2017 tax reform that continued into 2019. Kelley Blue Book’s Brand Watch, a consumer perception survey that weaves in consumer shopping behavior, recorded the highest level of pickup truck shopping since the survey started—a record 28% of new, non-luxury vehicle shoppers considered pickups in 2019.

Ford, despite its F-150 being in the twilight of its current lifecycle, reigned supreme, not only in full-size pickups, as it has for decades, but also in overall truck sales. With the Ranger added in January, Ford is will likely to beat General Motors, which endured a 40-day strike by the UAW that shut down production, in total truck sales for the first time since 2014.

The highly publicized and sometimes ugly brawl was for the No. 2 spot for full-size truck sales. At mid-year, the recently redesigned Ram 1500 sped ahead of the revamped Chevrolet Silverado to grab the No. 2 sales spot, a position it will keep for full-year 2019. This is the first time since the Ram brand was formed in 2009 that it beat Chevy in full-size pickups. Yes, Ram lured buyers with incentives and offered a mix of new and previous-gen trucks in 2019, but consumers also liked the 1500’s interior with its large screen, according to Kelley Blue Book Brand Watch. The strategy and investments worked for Ram, lifting it to #2. Critics said Chevrolet didn’t go far enough with the all-new Silverado’s interior and is paying the price.

From Akshay Anand, executive analyst, Kelley Blue Book:
This year was a good one for many carmakers despite the warning signs we’ve seen. In particular, most luxury makes had a banner year, aided by a wide selection of new SUVs. Luxury automakers with compelling compact and midsize SUVs – including BMW, Lincoln, Mercedes-Benz, Porsche, and Volvo – reaped the benefits of higher transaction well into $50,000 range. As long as there are consumers confident enough to spend significant amounts of money on vehicles, these luxury makes will benefit as they did in 2019.

From Patti Chapman, director, sales analytics, Cox Automotive:
While luxury was healthy in 2019, mainstream consumers and dealers grew increasingly concerned with the affordability of new vehicles in 2019. No wonder: In 2019, the average transaction price for a new vehicle was the highest in history, just below $40,000. The affordability issue was exacerbated by interest rates on vehicle loans, which, except for the most credit-worthy customers, did not drop despite the Fed lowering rates.

Hyundai and Kia had a great sales year, due in large part to their niche of relatively inexpensive vehicles. Plus, they added three-row crossovers that proved popular with buyers at comparatively affordable prices.

Some consumers continue to be frozen out of the new-vehicle market altogether and are buying used instead. Used-vehicles continued to be strong in 2019, and certified pre-owned is poised to set another record thanks largely to the high volume of off-lease vehicles returning to the market and an increasing share of them being SUVs, a more desirable body style for consumers.

From Brad Korner, general manager, Cox Automotive Rates & Incentives:
When it comes to incentives, this will indeed be a “December to Remember.” December puts a bow on a year of historically high incentives in terms of program volume and a near-record level of incentive spend as a percentage of average transaction price (ATP). The five-year running average of new-vehicle incentives as a percentage of ATP is 10.3%. Through November the 2019 year-to-date average was 10.72%. Notably, many brands have run above 13% over the past 5 years, well over the traditional 10% threshold. The new-norm may be 11% of ATP as automakers fight to move such a large number of available models.

Read more in the article “A December – And Year – To Remember!” by Todd Sommerville, practice leader, Cox Automotive Rates & Incentives, on the Cox Automotive Newsroom.