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Car Sales In 2017 Weren’t Great And The Future Is Looking Scary

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Since the end of the recession, the story of the auto industry has followed one major narrative: record monthly new car sales thanks to cheap credit and pent-up demand. Sure, some brands and automakers did better than others, and over time the market shifted to crossovers, trucks and SUVs over sedans and small cars, but things were generally fine and dandy. But December’s sales numbers indicate the party may be winding down a bit, and those sedans and small cars are in worse shape than ever.

This, coupled with some of the more troubling lending prices we’ve seen as of late and an increase in interest rates, have me wondering this: how bad could 2018 get for the car industry?


Let’s start with how the year itself ended. As of now, CNBC’s Phil LeBeau reports, it looks like 17.23 million new vehicles were sold in the U.S. in 2017—down from the all-time record of 17.55 million in 2016 and making last year the fourth-best year ever despite being the end of a seven-year streak.

All in all, it doesn’t sound bad, and it generally wasn’t.

But when you consider both the rising interest rates and how December closed out, it does raise some eyebrows. Nearly all automakers posted sales declines last month, and most analysts expect sales to drop even further this year to below 17 million or less.


Let’s look at how some individual companies did:

  • Ford posted a 0.9 percent full-year decline, and even though nearly 900,000 F-Series trucks moved last year, overall sales were dragged down by slow-selling cars like the Fusion and Lincoln Continental, according to Automotive News. (Want some good news? Sales of the updated for 2018 Mustang were up nearly 10 percent in December. As an enthusiast, I’ll take it.)
  • Again from Automotive News, Volkswagen sales were down 19 percent in December alone. Even the new Atlas and Tiguan weren’t enough to compensate for tanking sedan and hatchback sales. The VW Group’s Audi luxury division, on the other hand, set an annual record, largely on the strength of Q5 and Q7 SUV sales.
  • Toyota and Lexus were both down, although interestingly (and predictably), the RAV4 is now the former brand’s best-selling vehicle instead of the Camry. Honda boasted record annual sales for a third consecutive year despite a 7 percent drop in December alone. Again, it’s all on the strength of crossovers like the CR-V, HR-V and Acura’s crossovers. As for Nissan, same story: down in December, slightly up for the year.
  • Once more according to Automotive News, General Motors felt a third consecutive monthly sales decline, and a 1.3 percent drop year-over-year. Trucks and SUVs are doing great, but car-heavy Cadillac is tanking with its sales down 29 percent in December alone. Employee pricing deals at the end of the month helped a decent amount.

You get the idea. December was a rough month, the year itself was only moderately better than the year before, if it was at all, and the brands with a ton of SUVs and trucks are king right now. One can’t presume record-topping monthly and yearly car sales would last forever, because how could it? Eventually demand for new cars was bound to taper off.

But consider the following and understand why I’m concerned:

The average new car price rose to about $35,000 in 2017, again, on the strength of those SUV, crossover and truck sales—they are on average more expensive than their sedan and small car counterparts, even though crossovers are mechanically the same thing in many cases.

  • Americans didn’t, in many cases, just outright buy those crossovers and SUVs and trucks because we’re all magically making way more money now. We are often buying them through longer and longer loan terms, putting ourselves deeper into debt for a car that’ll be seven or eight years old when it’s paid off—if it ever is.
  • On that note, car payment defaults are now surging, particularly in the subprime loan sector that commands some $200 billion worth of the auto market. Sound familiar?
  • Automakers follow the market, which they should, and they’re going big on these fast-selling SUVs and crossovers and trucks, which are doing well now in part because of cheap gas. Gas prices are expected to climb at least somewhat in 2018, about 18 cents a gallon to be specific, according to a GasBuddy forecast. That’s nowhere near the highs we’ve seen in the past decade, but it’s hard to truly imagine gas staying cheap forever, and Americans have been saddled with big expensive vehicles they can’t afford to fill up before—and we know how that’s gone for everyone before.

Oh yes, and interest rates are going up, so credit won’t be as cheap as it’s been. The Wall Street Journal and others are quick to point out President Trump’s tax cut could in theory help mitigate some of that and help “monthly loan terms... remain manageable for most buyers.” But it’s somewhat depressing, and perhaps even disingenuous, to think that’s how the tax cut money will be spent.


I don’t mean to make this seem like total doom and gloom. I don’t foresee the global collapse of the auto industry—not yet. More than likely 2018 will be a down year, but barring any disasters the car business should weather everything just fine.

But it’s the disasters—a sudden spike in gas prices, economic downturn after people got car loans they couldn’t afford, climbing interest rates, nuclear holocaust—that has me concerned. The situation feels like a powder keg waiting to be lit, and the auto industry over the past few years has staked its future on those “record monthly car sales” that cannot possibly last forever.


And in the end, I worry it’s the consumer who will be hurt the most.