Growth is gone. Good times are not.
The 4.7 percent decline in April U.S. auto sales brought some clarity. It’s time to let go of the notion of an eighth consecutive year of growth. Instead, automakers and dealers can focus on better executing an orderly retreat.
It shouldn’t be a surprise. Since the first 2017 forecasts back last autumn, almost everybody predicted a modest-to-significant decline from the record pace of 2016 and 2017. And April was the fourth straight monthly decline.
But the first three were tantalizingly minor, allowing some hope of an uptick later in the year. Maybe, just maybe, there might be enough to eke out another record, another year in the sun. You know, just like last December’s surge pushed 2016 past 2015.
But April let the air out of that faint hope. Monthly volume fell more than 70,000 units short of last April. Now a third of the way through the year, the industry is down by 132,820 cars and light trucks.
So forget new records. But embrace good times. As IHS Markit’s Tom Libby pointed out Tuesday, we’re still on pace for 17 million-plus for a third straight time, “a string of high-volume years unlike any we have seen before.” The only other 17 million-plus years were 2000, 2001, 2015 and 2016.
Of course, nobody ever wants the merry-go-round to stop. Perhaps this time more so. We remember the last downturn was a doozy, a freefall from 2007’s 16.2 million units to 10.4 million in 2009.
Will this one be as scary? Almost certainly not. Automakers are, in general, applying the lessons so painfully learned in the Great Recession, such as cutting production as demand sags.
Ford Motor Co. and Fiat Chrysler Automobiles instituted production cuts last fall, and others have done so since then.
Incentives are unusually large and inventories a bit swollen, especially for cars. But so far nobody has broken ranks to blindly chase market share, notes Mark Wakefield, global co-head of the automotive practice at AlixPartners.
“They are using incentives and fleet sales as an opportunity to adjust their high inventories while they trim production,” he said Tuesday.
To use a military analogy, 2008-09 was a rout, when defenders broke and ran. So far, this has been a disciplined rear-guard action, with the main forces conducting an organized withdrawal while a smaller unit fights to delay the advancing opposition.
But let’s recognize that last year’s sales record was in a retreat in all but name. Fleet sales made the difference, with volume growth of 0.3 percent.
As Wakefield noted, “Retail sales actually peaked in 2015.”
Jesse Snyder is a senior correspondent for Automotive News.