Car Sales Poised To Squeak Out Another Record In 2016 – Forbes

Posted: Wednesday, January 04, 2017

(Photo credit: Luke Sharrett/Bloomberg)

Car sales could top another record in 2016 when automakers tally up their annual sales on Wednesday.

This would be the seventh straight year of rising sales, as car companies continue to benefit from lower gas prices, an improving economy and easy credit. Americans have also been snapping up trucks and SUVs, which carry higher margins.

However, if the industry manages to set a new record, it won’t be by much. Americans bought 17.47 million cars and trucks in 2015 and analysts were calling for it to be a tight race.

“It’s safe to say that the final week of the year will decide whether 2016 will make automotive history,” noted analyst Jeremy Acevedo. “It’s shaping up to be a true photo finish.”

On Wednesday, General Motors said sales surged 10% in December to 319,108 vehicles. Ford sales edged up just 0.3% to 239,854 vehicles, but that helped it to eke out its best annual sales performance in a decade.

Meanwhile, Fiat Chrysler sales fell 10% in December to 192,519 vehicles, with annual sales flat from the year before.

Analysts caution that the industry’s winning streak could be coming to an end. Car companies have been running heavy promotions to draw shoppers to the car lot, but that has pressured the bottom line. Interest rates and gas prices are beginning to tick up and more subprime borrowers are defaulting on their car loans.

Auto companies have begun to pump the brakes on production for certain vehicles that aren’t flying off the lot, with General Motors announcing plans to layoff 3,300 workers last year and Ford and Fiat Chrysler both temporarily halting production.

Companies have have also drawn the ire of President-elect Donald Trump for manufacturing cars across the border and could be looking at future trade restrictions. On Tuesday, Trump took aim at General Motors for making the Chevrolet Cruze in Mexico and selling it in the U.S. “Make in U.S.A.or pay big border tax!” he said in a tweet. (GM quickly noted that only a small number of hatchback Cruze models are made in Mexico and sold in the U.S.)

While headwinds loom, the fact of the matter is that Americans have been buying a lot of new cars and trucks.

“From a historical context, 2016 will go down as a blockbuster year in terms of new car sales and the overall health of the automotive industry,” said TrueCar chief industry analyst Eric Lyman.

Rising consumer confidence bodes well for car sales, said General Motors chief economist Mustafa Mohatarem, who believes 2017 will bring another year of at or near record sales.

Investors haven’t exactly been rushing into auto stocks, however. Shares of Ford fell 13% last year, while Fiat Chrysler inched up 1% and General Motors gained 5%. That pales in comparison to the 11% you would’ve made in an index fund tracking the S&P 500.


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