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December 2018 U.S. Automotive Sales

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Happy New Year! December and full-year U.S. auto sales were confirmed by many automakers this morning. As expected, sales came in strong as the year came to a close. With more than 17 million sales in the books, 2018 was another strong year for the industry, driven largely by a healthy economy and healthy fleet sales.

Please find below commentary and notable highlights from the team at Cox Automotive, reflecting on an interesting year of vehicle sales. If you would like to speak with one of the expert analysts from Autotrader, Kelley Blue Book or any member of the Cox Automotive Industry Insights team, please contact us.

From Jonathan Smoke, Chief Economist, Cox Automotive:
New-vehicle sales were surprisingly strong in 2018 despite late cycle headwinds from higher interest rates and more nearly-new competition in the used market. The key positive factor was stimulated demand from tax reform, which strengthened retail demand as the year progressed and also enabled strong gains in fleet sales.

Retail demand marginally declined in 2018, but it would have declined more had tax reform not boosted take home pay and consumer disposable income. This helps to explain how the retail SAAR averaged 14.8 million in the second half of the year compared to a much weaker 14.0 million rate in the first 6 months of 2018. And this was despite higher vehicle prices and higher interest rates driving average payments up by 5 percent year-over-year.

Tax reform was also the key catalyst for the strong gains in fleet sales that actually drove the year-over-year market gains. Through November, new vehicle sales into rental, government, and commercial fleets increased 7 percent in 2018 relative to the same period in 2017. The biggest gains came from commercial fleets, which were up 10 percent in 2018 over 2017.

While 2018 managed to post a gain in new-vehicle sales over 2017 thanks to tax reform, that boost is not likely to be repeated in 2019.

From Charlie Chesbrough, Senior Economist, Cox Automotive:
Stock market volatility, coupled with another rate increase, didn’t chase away vehicle buyers as December sales mostly shrugged off continued headwinds. Sales are coming in near expectations, however a surprise from Nissan is a big part of the month’s pace. Ford, GM and Toyota all lost volume in December while FCA, followed by Nissan, showed large gains. Monthly sales of cars continue to decline at double digit rates, yet Nissan had an increase in December – suggesting more than expected fleet activity.

Of note, GM’s fourth quarter numbers declined at a faster rate than their annual total, suggesting product demand is weakening. We are forecasting sales to slow further in 2019. For some auto makers, the slowdown has already begun.

From Zo Rahim, Research Manager, Cox Automotive:
While new-vehicle sales in 2018 came in stronger than expected, the big surprise was the divergence in car and light truck sales. Just a few years ago, in 2015, car share of new light-vehicle sales was 43 percent. Shifting consumer preferences and shifting product strategies at the manufacturers, however, led car share down to the lowest point in U.S. automotive history in 2018 – down to 30 percent for the full-year.

The drop in car share is driven mostly by the Detroit Three, where car share in 2018 came in below 20 percent. Even Asian brands continue to struggle with cars, though they have not made cuts to their car product lines yet. As the industry focuses on pickups and CUVs in 2019, car supply should remain favorable to demand; various inventory metrics for cars remain healthy, and far better than light trucks, which suggests decreasing car sales are not a major issue for the manufacturers. In fact, one could argue that demand for cars is strong and affordability concerns are causing potential shoppers to move to the used-vehicle market, where there’s ample supply of desirable vehicles, highlighted by pricing gains in car segments in the wholesale market.

From Akshay Anand, Executive Analyst, Kelley Blue Book:
Though key domestic brands are leaving car segments, import brands are still struggling with car sales. Brands like Honda, Toyota, and Nissan have been long known for their Accord, Camry, and Altima, but maybe it’s time to start acknowledging the CR-V, RAV4 and Rogue as the true engines that make the Japanese brands go. Sedans will still play an important role, especially given some of the history, but automakers need to make sure they’re not too focused on increasing monthly sedan sales and instead focus on making sure a consumer buys from their brand period, regardless of segment.

From Michelle Krebs, Executive Analyst, Autotrader:
As expected, trucks are the big story for 2018. FiatChrysler’s redesigned Ram 1500, which took time to gain traction, closed the year strong with December sales up 34 percent, pushing annual sales higher, and a trophy case full of new awards. General Motors introduced revamped Chevrolet Silverado and GMC Sierra late in the year, with combined sales of the pair up for the year. Ford endured a major hiccup in truck production due to a fire at a supplier plant, but still managed to increase sales.

We anticipated a truck war in 2018 and we got it, with big wins by many. Tax reform added fuel to truck sales by prompting businesses to add to or freshen their commercial fleets. Lower gas prices didn’t hurt either. Looking ahead, we expect the truck wars to continue in 2019 with Ram and GM in full production of their new full-size models while Ford launches the all-new Ranger and Jeep the all-new Gladiator.

From Karl Brauer, Executive Publisher of Autotrader and Kelley Blue Book:
Looking back at 2018, you can’t help but note the solid growth in EV sales over the past 12 months, though much of it was driven by a single manufacturer – Tesla. With additional automakers entering the EV segment, many are speculating 2019 will be the year EVs finally go “mainstream”. Of course, that depends on the definition of mainstream. Even if EV market share in the U.S. doubles in 2019, they will still represent less than 5 percent of the new car market. High growth? Yes. Mainstream personal transportation? Not yet.

From Brad Korner, General Manager for Cox Automotive Rates and Incentives:
For the most part, incentives in calendar year 2018 held relatively stable. The sales pace remained strong and inventories did not become bloated, so there was no need for serious incentive wars. One trend we see developing: As more dealers adopt digital retailing tools, there’s greater consumer transparency earlier in the buying process. Shoppers have the tools to “pencil” their deals online—create price and payment options—while having availability to all incentives (targeted and conditional) for the many different types of transactions. This can help auto makers be far more efficient with their incentive spend.

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