From the May 2016 issue
The numbers are in and it’s official: 2015 was the auto industry’s best year in history. Automakers sold 17,470,659 cars, light trucks, and SUVs in the U.S. last year, surpassing the record set in 2000 by more than 68,000 units. Between 2001 and 2007, sales had been on a gradual decline, and when the recession hit in 2008, they plunged into the abyss, hitting a low of 10.4 million units in 2009.
This graph of annual sales shows the long, hard climb out of 2009. Analysts predict that sales will hold strong through 2018.
THE THREE WHYS, MAN
A complex web of factors influences car sales. Here’s how three of the biggest—the unemployment rate, interest rate, and the Consumer Confidence Index—relate to the sales totals over the past 10 years:
LOTS OF LUXURY
Not only was 2015 the best year for the auto market as a whole, but luxury automakers did better than ever before, too. A 0.5-percent gain since 2011 doesn’t sound like much, but in terms of volume, it’s more than 600,000 additional vehicles. Land Rover realized the strongest growth, increasing sales from 26,000 in 2011 to about 70,500 in 2015. IHS predicts that luxury sales will account for 13.5 percent of the market in 2020.
Analysts say a variety of factors have coaxed the sales bull out of hibernation. The most obvious one has been low fuel prices. Gasoline averaged $2.52 per gallon in 2015 and is already lower this year. Sources such as the International Monetary Fund and the World Bank predict that the price of crude will stay low through the end of the decade (although a few angry men with Kalashnikovs can easily change that).
Another factor was pent-up demand from depressed sales in years past, says Matt DeLorenzo, managing editor for Kelley Blue Book’s KBB.com. Fewer new cars eventually translates into fewer used cars, which drives up the prices of the latter. More-expensive used cars, in turn, make new cars more attractive. “There was also a huge uptick in leasing, which made it easier to get into a new car,” he says.
Consumers who chose buying over leasing benefited from low interest rates. That, plus a low unemployment rate—the U.S. Bureau of Labor Statistics says it fell to 5 percent in the last quarter of 2015—made people more likely to want to go out and buy cars, says Stephanie Brinley, a senior analyst at IHS Automotive.
Even in a growth market, not all winners are created equal. Although truck sales rose a little above their pre-recession levels, the biggest explosion was in the crossover/SUV segment, which now accounts for 38 percent of sales in the U.S. But, as Brinley points out, all the economic green lights have increased consumer confidence, providing more action across the industry. “Luxury did really well this year,” she said. “If we have money, we tend to spend it.”
Who were the biggest winners? The three bestselling brands in the country—Ford, Chevrolet, and Toyota—all saw 4- to 5-percent increases in sales over 2014. Jeep had the biggest spike among domestic automakers, boosting sales by almost 25 percent. Subaru also realized a double-digit increase, moving more than half a million units.
With a 6-percent increase in sales on the books for 2015, IHS says things will likely slow a bit in 2016, down to around 2 percent. Growth will be slower, but automakers are more competitive than ever. And that is always good for consumers.
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