17M U.S. sales? Early doubts fall away again

The auto industry has always been cyclical, but in recent years, a whole new industry cycle has emerged.

Call it the pessimism cycle — the annual belief, usually expressed very early in the calendar year, that auto sales will have fallen off by several hundred thousand vehicles by year end. Then that pessimism fades away as vehicles continue to sell and sell until it looks at the end of the year like the market might be flat, or even up.

As it did last year and the year before, the pessimism cycle has returned to its late-year upswing as the industry recorded a seasonally adjusted annual selling rate of 17.05 million in November. It appears to be in line to finish the year having sold 17 million-plus vehicles in the U.S. for a record fifth consecutive year.

Once again, the strong finish has so far materialized despite broad earlier predictions by analysts and industry executives alike that sales likely would settle back into the mid- to high-16 million range.

"To have another year at 17 million is a fantastic thing for the industry," Bob Carter, head of sales for Toyota Motor North America, told journalists gathered in Detroit last week. Carter admitted that he, like most of his industry counterparts, had predicted a market closer to 16.7 million for 2019. "Now it looks like the only question left is whether we'll be rounding up to 17 million or rounding down," he said.

Though the three Detroit automakers did not report their November sales, most of the automakers that did release results rode continued strong demand for light trucks — pickups, vans, SUVs and crossovers — to sales gains in November, which had an additional selling day in the month compared with last year.

Toyota Motor North America's sales rose 9.2 percent, the company's second-biggest gain but only its fourth increase of the year. American Honda's deliveries spiked 11 percent, the company's second double-digit gain in a healthy year. Hyundai Motor America tallied its 15th gain in 16 months, advancing 6.2 percent.

Sales also grew at Subaru, Mazda, Volkswagen Group and Mitsubishi. But at Nissan Group, demand skidded 16 percent as the company continued to scale back on fleet shipments and incentives to shore up retail profits.Incentives continued to drive sales in November, especially at automakers with older inventory hanging around, said Brad Korner, general manager at Cox Automotive Rates and Incentives.

"By our count, incentive program volume in November was at its highest point since July," Korner said, adding that 2019 is on track to set a record for the number of incentives available to consumers.

Higher fleet deliveries have offset a decline in retail volume for much of the year to date, while average transaction prices have crept up about 1 percent year over year, according to data compiled by Cox Automotive.

Light-truck sales industrywide were up an estimated 6.5 percent in November and continue to represent nearly three of every four vehicles sold, while car volumes slid an estimated 11 percent in November, according to data and estimates compiled by the Automotive News Data Center.

But the falloff in coupe and sedan sales was not universal; some models saw double- and even triple-digit year-over-year gains, including the Honda Fit (304 percent), BMW 3 series (95 percent) and Nissan Altima (37 percent).

"While all-new utility vehicles continue to drive improvements throughout the industry, some automakers also saw a good month for their passenger car lines as well," said Stephanie Brinley, principal automotive analyst for IHS Markit. "These successes do not suggest a revival for sedans is in the offing, but we may see a new normal pace for the segment evolving. Whether car or SUV, the availability of new and refreshed products is being rewarded by consumers."

With the busiest selling month of the year yet to go before 2019 ends, the industry has an estimated 15.5 million sales on the books, including estimates of sales from automakers who will report fourth-quarter sales after the first of the year. And while political uncertainty in an election year may weigh on 2020, Cox Automotive Senior Economist Charlie Chesbrough says the U.S. auto market shows few signs of slowing down.

"Strong labor and equity markets continue to provide the foundation for robust vehicle demand," Chesbrough said. "Until either of those changes substantially, strong vehicle markets are likely to continue."