Automakers have reason to celebrate as they gather this week at the Detroit auto show to unveil the new range of brawny trucks, high-tech cars and rugged sport-utility vehicles that will arrive in showrooms in the months ahead.
They just ended 2017 with sales in the United States topping 17 million vehicles for the third year in a row, the best three-year stretch the industry has ever experienced.
Spurred by low gasoline prices, Americans are snapping up trucks and sport-utility vehicles, which generate fat profits for manufacturers. The American economy remains strong, with unemployment low and interest rates modest.
“It’s going to be a very good year in 2018,” said Mike Jackson, chief executive of AutoNation, the nation’s largest auto retailer.
But a closer look suggests that the industry may be headed for choppier waters than the hoopla in Detroit would indicate. While sales are healthy, consumers are actually buying fewer new vehicles. Purchases by individual customers at dealerships — known as retail sales and considered the most accurate reflection of demand — declined slightly in both 2016 and 2017. Some automakers are offsetting lower consumer purchasing by selling more cars to fleets like rental-car companies.
More worrisome is that the drops in retail sales have come even as manufacturers have resorted to heftier discounts, which eat into their profits. Sales incentives are now equal to more than 11 percent of the average vehicle’s sticker price. As recently as 2014, that figure was below 8 percent.
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SOURCE: Neal E. Boudette
The New York Times via CNBC
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