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It's a New Year: January 2019 Sales Roundup
The long slog that is January provided a mixed bag of sales results for America’s automakers, with some enjoying the fruits of their new products while others stared down the barrel of red ink as they tried to kick their fleet habit. Frightening and frigid weather patterns didn’t help anyone, either.
Talking heads are expecting this calendar year to be the first since 2014 in which total vehicle sales in America drop below 17 million units. While it seems a bit early to sound that alarm, it cannot be denied that some companies have already dug themselves a big hole.
Blame China: Jaguar Land Rover Layoffs Won't Be Exclusive to Europe
On Thursday, Jaguar Land Rover was reported to be in the midst of a plan that would eventually lay off roughly 10 percent of its UK workforce — roughly 4,500 employees. Considering the company has been forced to endure waning demand for sedans and just about everything with a diesel engine, a bit of restructuring was inevitable. Especially since everyone else is doing it at the moment.
However, JLR’s layoffs won’t be exclusive to Europe, as initially presumed. Despite the vast majority of its workforce residing in the United Kingdom, a small portion of its American staff will likely feel the impact, too.
Mercedes-Benz: Still Leading Luxury, by Volume
Mercedes-Benz managed to hold onto its heavyweight title in luxury sales for the third year running, at least as far as the United States is concerned. Though the domestic match was close — BMW’s 311,014 deliveries in 2018 were only a few thousand units shy of Mercedes’ 315,959. In fact, BMW volume improved 1.7 percent against 2017 while MB sales were down 6.3 percent, with most of the ground being lost in the second half of the year.
During that same time frame, Tesla sales exploded. By year’s end, the luxury EV manufacturer had 182,400 domestic deliveries under its belt — nearly four times the volume witnessed in 2017.
Why American Muscle Might Outlive the Standard American Sedan
Domestic sedans are currently being walked up to the edge of a mass grave. Beneath them rests their two-doored brethren and the first wave of four-doors previously executed by the Big Three. Ford has promised a lineup comprised almost entirely of pickups and utility vehicles in the coming years and General Motors is in the process of doing the same. Fiat Chrysler wisely kept its automotive killing spree under the radar by being the first to pull the trigger and not making a big deal of it. But consider what’s left within its domestic nameplates: SUVs, pickups, a few vans and the endangered Chrysler 300 — which is really a more of a commoner’s luxury vehicle.
FCA also has the Dodge Charger and Challenger in its stable, but they’re not what one might consider when imagining your typical sedan. They’re ancient, powerful creatures. Gas-guzzling muscle cars, brimming with attitude, and seemingly impervious to harm. Goliaths without a David or fuel crisis to put them down. Who could have ever imagined that American muscle would crawl back out of its grave after such a long absence and manage to outlive the typical sedan?
Their manufacturer, for one.
Sorry, Shoppers: October Auto Sales Expected to Slip, Along With Incentives
Analysts are projecting U.S. light vehicle sales will decline in October as incentives do the same. Could they possibly be related?
While we don’t have have official figures on how much of the domestic population has a limitless supply of cash, our collective intuition suggests most do not. This leads us to believe the elevated cost of owning an automobile has likely impacted deliveries for this month. Fortunately, the experts seem to agree, predicting the lowest October volume since 2014.
New vehicle incentives have been on the decline for a while now. This looks to be the fourth consecutive month without a rebound — which would make it the longest time frame since the recession, according to J.D. Power. That’s not necessarily a bad thing for automakers, since they’re losing less money on every model sold.
Damn: Used Cars Are Getting More Expensive
Ever since the end of the recession, new car prices have crept up steadily while used vehicle values remained comparably low. In fact, compact cars actually became less expensive between 2013 and 2017 as the crossover craze left a glut of small, economical vehicles that could be purchased for little more than a smile.
Unfortunately, the tide is turning. A sudden influx of end-of-lease vehicles was supposed to continue suppressing used vehicle prices for 2018. However, things have not played out that way. Despite there being so many gently used vehicles saturating dealer lots, average used-vehicle prices reached $20,153 in the second quarter of this year — making it the first time the market has ever broken the $20K threshold. According to research firm Edmunds, the 3.3-percent increase over 2017’s second quarter was also a record.
American Automakers Losing Footing in China's Wonky Market
Last week, we looked at how the world’s largest automotive markets are coping. If you’re interested in an abridged version, they could all be doing better. We also noted that China was getting around to summarizing its summer sales data. Well, that ship has since come in, and it was full of corpses. The country has endured three straight months of falling car sales after years of consistent growth.
As the world’s largest automotive market, China impacts just about every other industrialized nation on the planet. Unfortunately, the China Association of Automobile Manufacturers (CAAM) reported that influence helped the market share of U.S. brands fall to 10.7 percent in the first eight months of 2018 versus 12.2 percent just one year earlier. The association’s assistant secretary general, Xu Haidong, said this decline could be attributed to American firms inability to refresh their lineups in a timely manner and definitely had nothing to do with the trade war, anti-American sentiments, or the boycotting of U.S. brands by Chinese consumers.
North America Isn't the Only Major Auto Market With Huge Headwinds
For the past two years, we’ve reported that the post-recession upswing in new car buying in North America seems to have plateaued. Environmental factors have led to Millennials buying fewer cars than their parents’ generation, and wealthy folk have proven unable to pick up the slack — as no amount of money allows you to drive several cars at the same time.
Most major carmakers posted declining U.S. deliveries in July, and August’s data proved a mixed bag. However, America isn’t the only big market that’s taking a beating. The First World seems to have collectively surpassed peak growth and now has to ride out an extended period where volume dwindles until some other nation can afford to import container ships full of sparkly new automobiles.
New Import Duties Could Body Slam Subaru
Subaru is a once-tiny manufacturer that grew in leaps and bounds thanks to high demand from the United States. The automaker is the eighth best-selling brand in the region, despite being a scrappy upstart, and has managed multiply its volume many since the 1990s. But, like any business loaded into a cannon with the word “success” emblazoned on the side, it can’t continue streaming through the clouds indefinitely without encountering some turbulence.
Subaru may be in for troubled times.
Ailing Motorcycle Industry Could Be Canary in Coal Mine for Automakers - Part Two
Last week, we discussed how the motorcycle industry’s total failure to entice new riders for over a decade has come back to bite it in the ass. Two-wheeled ownership declined drastically in the United States after the Great Recession and never really bounced back. Blame a disinterested population of youngsters with less discretionary funds and few entry-level options to consider.
I speculated that automakers could be on a similar path, despite the passenger car segment being more of a necessity for average commuters and less apt to collapse outright. But that isn’t to presume they might not be subject to similar pitfalls, and we’ve a new one to consider. Harley-Davidson, which serves as the poster child for the motorcycle industry’s current crisis, recently announced it will end all U.S. production of motorcycles sold in Europe.
Those bikes will now be manufactured overseas. The company said in a regulatory filing with the U.S. Securities and Exchange Commission that retaliatory tariffs levied by the European Union on motorcycles exported from the U.S. jumped from 6 percent to 31 percent. Harley-Davidson’s already expensive products come at an additional premium in Europe, and the the company estimates the new fines will add another $2,200 per motorcycle, on average.
Ailing Motorcycle Industry Could Be Canary in Coal Mine for Automakers
If you think car enthusiasts are a dying breed, you should take a look at motorcyclists. The two-wheeled industry is in serious trouble. A total failure in marketing occurred over the past decade. New riders aren’t coming in fast enough to replace the glut of Baby Boomers rapidly aging out of the market, and there’s a looming paranoia that self-driving vehicles could push bikes off the road entirely.
In 2017, U.S. motorcycle sales were down 11 percent, and no company was hit harder than Harley-Davidson. The brand has the oldest consumer base and has repeatedly failed at recruiting younger riders. While it builds a fine product, it’s not one that appeals to millennials. This generational cohort proved hesitant to engage in motorcycling as a pastime — a situation not helped by having less disposable income than Generation X or the Boomers did at the same stage in their lives. Young women are also poised to start out-earning young men, and few brands have successfully tapped into the female demographic.
The British Car Market Is Flushing Itself Down the Loo; Industry to Follow?
After four years of consecutive growth, the United Kingdom’s automotive market has tanked for 12 months straight. The culprit is, of course, dwindling diesel sales.
Thanks to European governments latching onto the fuel as the cleaner alternative to “petrol” throughout the 1990s (subsequently incentivizing the fuel as a way to meet aggressive CO2-reduction targets), diesel-powered autos accounted for roughly half of all new auto sales between 2009 and 2017 . But diesel is now “evil” and everyone in Europe has started avoiding it.
In March, diesel sales declined by 37.2 percent — leaving the once dominant fuel with just 32 percent of the new car market. Unsurprising, as the new trend in Europe is the widespread (future) banning of the fuel in city centers. April’s sales are expected to be even lower, as the British government’s new taxes on diesel vehicles come into effect. Those fees and a weakened pound, which practically everyone has attributed to Brexit, forced new car sales in the UK down by 16 percent.
'World's Greatest' Car Salesman Refuses to Relinquish Title Without Proof
For over four decades, Joe Girard has held the Guinness World Record for the most automotive sales in a single year. The 89-year-old retiree is so proud of his achievement that his own website proclaims him as the greatest retail salesman in history while simultaneously urging you to purchase his sales training books, DVDs, and audio CDs. However, he appears to have been trumped by a Cadillac and Chevrolet salesman from Dearborn, Michigan.
Girard is having none of that and has decided to challenge the validity of the new record. “This guy claims he beat my record of 1,425 new cars that I sold in 1973,” he stated. “What I did immediately, I called my attorney.”
Dealership Throughput Expected to Slip for Third Year in a Row
While sales numbers are a decent metric for assessing volume, they don’t give an accurate representation of what’s actually happening at the dealership. Instead, the figure represents the number of models an automaker was able to move from the factory. Theoretically, a manufacturer could load up a bunch of trucks at the end of the month and count them as “sold” to bolster volume — whether or not real people actually bought them.
Dealer throughput is better for assessing the current consumer climate. But we’re sure you won’t be surprised to hear that it’s cold and only expected to get colder. U.S. dealership throughput, the average number of new-vehicle sales per dealership, is expected to slip 2.9 percent this year. That equates to a mean of 920 vehicles in 2018, down from 947 in 2017.
So Far, 2018 Auto Sales Are Better Than Expected; Thank Dangerously Heavy Incentives
With the automotive market continuing to cool off, the industry went into 2018 with a less than optimistic view. Volume for the year is anticipated to continue its downward trend but, incredibly, January appears to be on par with the same period last year — if not slightly better.
Did the analysts get it wrong? Probably not. Incentive spending was up across the board and that’ll likely be the case throughout the rest of the year. The real trick will be for automakers to keep their lineups appealing without going wild with discounts. That’s because the annual forecast still calls for lower volume than in 2017.
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