Strong U.S. New Vehicle Sales Are Ending Soon but Trucks Still Make All the Money

Illustration for article titled Strong U.S. New Vehicle Sales Are Ending Soon but Trucks Still Make All the Money
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Analysts predict the end of the car-sales party coming soon, Detroit’s Big Three duking in out with truck sales all the same, Mercedes-Benz is still the king of luxury here and more in The Morning Shift for Friday, Jan. 4, 2019.

1st Gear: Last Call Happening Soon

Yes, auto sales were pretty strong in 2018. But if you don’t think a slowdown in car sales is coming because of these optimistic numbers, here’s some stuff to think over.


In addition to rising interest rates and increasing average prices of new vehicles, automakers have also been keeping reported sales numbers up by selling more cars to rental fleets, reports Bloomberg. Demand was also helped along by Donald Trump’s tax cuts, “especially for corporate buyers who added to their fleets.”

But analysts that Bloomberg spoke to warn of the coming decline.

The biggest U.S. automaker’s deliveries fell at a faster rate in the last three months of the year than for all of 2018, suggesting demand is weakening, said Charlie Chesbrough, senior economist at Cox Automotive, which is forecasting sales to slow further in 2019. “For some automakers, the slowdown has already begun,” he said.

Jamie Albertine, senior analyst with Consumer Edge Research, sees an even bigger drop, with sales slipping to about 16.5 million in 2019. Fleet purchases were up 10 percent last year, and that won’t continue, he said. Rental-car companies will pare back supplies on their lots, and commercial buyers are unlikely to see any new tax benefit. Retail demand also is softer and won’t support the 17 million total sales the industry has enjoyed for four consecutive years.

Factors like low unemployment and high consumer confidence resulted in higher-than-expected car sales last year. But automakers like General Motors, Ford and Toyota were hit with sales declines in December. It’s believed to be part of a greater trend starting.

All of that being said, here are some following gears about how good sales were last year. Enjoy it while it lasts friends.


2nd Gear: Truck Fight!

As small-car sales continue to dwindle, there’s at least one market that’s still robust: Pickup trucks. Ford used to dominate here with the F-Series, followed by GM’s Chevy in second and Fiat Chrysler’s Ram in third. But that might soon change.


Despite 2019's predicted sales slumps, these three automakers are still going very strong on the pickup front, according to Reuters. Especially since December’s and fourth quarter sales figures show that Ram and Chevy tied for the second place spot.

All three have spoken about how truck sales benefit them:

Ford’s U.S. sales chief, Mark LaNeve, on Thursday called the F Series “the backbone of our franchise,” during a conference call, and added the “segment will continue to be strong, but hotly contested” in 2019.

GM has said 27 percent of Chevrolet and GMC trucks - which can haul trailers by day and substitute for a luxury sedan by night - sell for more than $55,000.

FCA was the only one of the three that reported an increase in full-size pickup sales in the fourth quarter.


And since this is all about profits, it doesn’t seem like there’s an end in sight.

Big trucks can pull in at least $17,000 apiece in pretax profit for GM, Reuters reports. Conversely, many of the sedans offered by GM, FCA and Ford are unprofitable to the point of cancellation altogether.


As we have previously reported, skyrocketing truck prices are already leaving average buyers behind. Truck buyers today want their pickup trucks to function as luxury vehicles as well, thus adding to the price tag.


Listen, I am not a truck buyer, as trucks are not my thing, but I know an unsustainable market when I see one.

3rd Gear: Mercedes Still Luxury King

In the highly competitive fight for first place as America’s highest-selling luxury brand, Mercedes has won 2018 again, keeping itself in the top spot for the third year in a row.


But the victory wasn’t won by much. Mercedes beat out rival BMW by just below 5,000 cars, Automotive News Europe reports. The numbers:

Mercedes sales were down 6.3 percent to 315,959, while BMW reported a rise of 1.7 percent to 311,014.

BMW, however, bested its chief German rival in December — with sales of 34,357. Mercedes, meanwhile, sold 32,016 vehicles, excluding commercial vans.

Mercedes’ volume leaders in December included the GLC, C-class and E-class model lines.

The GLC took the lead with sales of 7,294, followed by C-class sales of 6,799. The E class rounded out the top three with 5,042 units sold.


The outlet also noted that 63 percent of BMW’s U.S. sales in December were crossovers. The X3 was the top-selling model here for the 10th month in a row, and that “the BMW X3 and X5, combined, represented more than two out of every 5 BMW vehicles sold in the U.S.” last month.

Crossovers still. Good for the automakers then, I guess?

4th Gear: Ford Goes Quarterly

At the end of every month, you can easily look up how most automaker fared in their monthly sales reporting. It’s a handy and easy way to track the market. Ford just announced that it’s moving away from that model, however.


Following GM’s lead, Ford said today that it’s also switching to a quarterly reporting system for its U.S. sales figures model, reports Automotive News. From the story:

Ford, which is one of two automakers to hold monthly sales calls for analysts and media, will transition to a quarterly call and release beginning in April. It will still provide monthly figures to data agencies.

GM moved to quarterly sales reporting last April. Ford, at the time, said it would assess the situation, noting that there’s oftentimes volatility in monthly figures.


Ford’s U.S. marketing vice president said that the company believes this system will grant better transparency.

I don’t know if I agree with that. I think a quarterly reporting system will actually result in less transparency, as there are physically fewer numbers publicly provided. And, because some companies now report monthly and some do not, there could be more speculation and errors, some analysts caution.


It also seems like very convenient timing to start implementing this system during a year when auto sales are expected to fall. Hmmm!

5th Gear: UAW Is Suing GM

When GM announced that it would be closing five plants in North America and cutting thousands of jobs, you could bet on the UAW getting involved. And it has. This is the first lawsuit of probably many to come.


This particular suit, filed on Wednesday in the U.S. District Court in Northern Ohio, concerns GM’s intention to close the Lordstown, Ohio, assembly plant this year, according to the Detroit Free Press. From the story:

“UAW members negotiated a binding agreement and we expect General Motors to follow the contract they agreed to and GM members ratified,” said UAW Vice President Terry Dittes. Dittes is also director of the UAW’s GM Department.

The contract requires GM to transfer union members with seniority to open jobs at other plants. But, the suit alleges, GM is circumventing the agreement by using temporary employees at its factory in Fort Wayne, Indiana, instead of seniority union members. That limits the number of openings available to transfers.

The suit asks that the court order GM to transfer seniority union members to the Fort Wayne plant in keeping with the contractual agreement between the parties.


Unions (when they aren’t being shitty) are good! Fighting for worker protection is good!

Reverse: Welcome to the Euro


Neutral: Do You Think a Sales Slump Is Coming?

Why or why not? And will it too affect the strong truck market?

Writer at Jalopnik and consumer of many noodles.

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Neutral.... I have given up predicting markets. But 17 million doesn’t seem that bad. Per google, there are 222 million licensed American drivers. If the average driver got a new car every 10 years, new car sales would be 22 million. So 17 million doesn’t sound extreme to me.

The thing I can’t figure out is why Americans are getting super expensive trucks. To me a truck is a tool. A GMC Denali is like having a gold planted Crescent Wrench. It doesn’t do anything better, but you are scared to use it because you might scratch it. I’ve felt the high end luxury truck market is unsustainable for decades. Every year I predict that someone will figure out they don’t need a $30, 40, 50, 60, 70k truck to get groceries and an occasional 2x4 from the big box store. Shoot, I don’t understand the appeal of a truck that doesn’t have an 8' bed. But what do I know? A truck with a bed smaller than my sedan’s trunk that gets half the gas mileage and costs 4x as much sells faster than they can make them while sedans are dying.