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FULL ARTICLE | EDITORIAL 
Has the US car sales bubble finally popped? 
Peter Schmidt | Editor

Published: Fri, 04th November 2016 13:06:18 GMT
 

US Car sales October Audi LA


Open quote signHas America’s car market peaked? US October Light vehicles fell 5.9 per cent marking the third successive fall in a row and this year’s second biggest decline. So when looking even casually at latest underlying US light vehicle sales trends, few would probably disagree that this market, following more than half a dozen years of strong recovery growth, and culminating last year with a record 17.47m sales, has probably peaked.

All mature car markets, and the US is one, have always been subject to cycles of boom and bust and bubbles that eventually popped. 

So in light of recent developments in the US car market the question now foremost on the minds of autoindustry leaders, and none more so than bigwigs at GM, Ford and FCA, is whether from now on the US car market will drift into the almost inevitable downward phase of the cycle. 

So who can blame them for looking anxiously at recent domestic vehicle sales trend?

Detroit’s intrinsic carmakers have bounced back from the abyss thanks almost entirely to the rebound in domestic sales and in particular to consumers’ rekindled love-affair for Light-Trucks, the most profitable part of the industry’s automotive business. 

So given the likelihood that America’s car-loving public has lost at least some of its ravenous former appetite for the industry’s shiny new vehicles, and perhaps more relevant, its willingness to take on more debt, Detroit’s carmakers are now in danger of potentially losing the biggest chunk of their recent revenue and profit source. 

The prospect of a major and lasting downturn in the US Light-Vehicle sales arena is certain to send shivers down the spines of heavily US-reliant carmakers. 

Now, is it time to head for the bomb shelter? 

Not quite. 

So how about October’s seemingly tell-tale big dip in US auto demand? 

Put simply, it’s not as bad as it looks from cold hard numbers. 

For a starter, this October compares to bumper sales in October last year, when sales soared to the way and ahead highest level for this particular month since 2001. 

Almost the same goes for this year’s August and September. 

Back to October. 

Last month, compared with the same month last year, had two fewer selling days, which, statistically at least, simply couldn’t fail but hit October’s sales. 

Same goes for West Europe’s October market. 

Case in point, in Germany, on the back of otherwise healthy economic development October car sales dropped by a trendbucking 5.6 per cent.

October car sales in France fell 4 per cent

Now, given that October’s new car sales in Western Europe are fractionally down on the prior-year figure, does that signify the beginning of a downturn? 

Same goes for the US. Even if this and next month will continue the recent trend with slightly lower US Light-Vehicle sales, chances are that this year’s sales will comfortably beat 17m units, which would be only the second time since 2001 that these truly vintage sales levels were reached.

Bad news tends to make more noise than good news. 

Although last month’s sales in the US failed to match last year’s levels doesn’t necessarily imply that October’s swerve is a lasting directional change or the beginning of a menacing downturn. 

Nevertheless, likelihood is that the US market has peaked. 

The upbeat US sales story of the past half-decade, and consumers’ breakneck rush into highly profitable Light-Trucks and SUVs in particular, was a godsend for Detroit’s carmakers. 

It is little wonder then that GM, Ford and FCA will continue to stoke up and fan the fire. 

So, the upbeat US Light-vehicle sales story is not quite over, but making money from it looks to be harder than ever.
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