Market slips 5.2% in Dec.; SAAR dips below 17M

U.S. light-vehicle demand fell 5.2 percent in December, the Automotive News data center estimates, in part because of one less selling day, one less weekend and fewer fleet sales, even as incentives reached record highs.

December's volume, 1.54 million cars and light trucks sold, was the weakest showing for the month since 2014, when sales tallied 1.507 million.

Nissan’s U.S. sales plunged in December and many of its biggest rivals posted less-severe declines, but the industry still managed to record a fifth straight year of sales above 17 million units, with 17.1 million cars and light trucks delivered in 2019, down 1.2 percent from 2018.

The seasonally adjusted, annualized rate of sales came in at 16.98 million, slightly below forecasts and well under December 2018’s 17.6 million pace, signaling the market continues to cool.

The SAAR topped 17 million six out of 12 months of 2019, with the sales pace picking up in the second half. On Friday, General Motors estimated that the light-vehicle SAAR in the fourth quarter was 17.1 million.

Nissan Group’s 30 percent drop marked its biggest monthly tumble in more than a decade, as the company continued to reel from management churn while pulling back from high incentives and profit-eroding fleet business. Toyota volume fell 6.1 percent, while American Honda skidded 12 percent, its second-biggest decline of the year.

General Motors released its first sales figures in three months. It said fourth-quarter sales dropped 6.3 percent, showing the effects of a 40-day strike that shuttered plants in September and October.  Automotive News estimates that GM volume fell 5.5 percent in December, while Fiat Chrysler deliveries slipped 0.2 percent.

Ram, up 18 percent, was the only FCA US brand to post an increase for the year.

Ford Motor Co. said Monday that fourth-quarter sales fell 1.3 percent, with lower car and utility sales offset by higher truck volume. Automotive News estimates that Ford volume rose 1.3 percent in December, with deliveries up 0.6 percent at Ford and 13 percent at Lincoln.

Some analysts said December sales also came in below forecasts because fleet shipments were weaker than expected.

Car sales continued to fall last year, dropping 10 percent to 4.79 million, or 28 percent of the market. Light-truck demand rose 2.8 percent to 12.3 million in 2019. Sales of large pickups set a record, rising 2.5 percent to 2.48 million. Among other key segments, compact cars (down 16 percent) and large cars (down 19 percent) showed the biggest declines, largely reflecting discontinued models at Ford and GM.

The reintroduction of the Ford Ranger made midsize pickups a true battleground again, and helped the segment expand 22 percent last year.

Even as the industry racked up sales in excess of 17 million for a record fifth straight year, warnings signs grew.

“December’s soft performance closes the year on a down note, but another record for transaction prices reinforces that manufacturers are producing the type of vehicles that consumers want in the market,” said Thomas King, president of the data & analytics division at J.D. Power. “Record prices, however, have also been accompanied by record incentive levels, which signifies that there is still too much supply relative to overall demand.”

Company by company

At Toyota, deliveries fell 7.2 percent at the Toyota division and 0.6 percent at Lexus. Overall, Toyota Motor said car volume fell 10 percent and light truck deliveries slipped 4.1 percent last month. Demand dropped 9.6 percent for the Toyota Camry, 6.7 percent for the Corolla, 12 percent for the Highlander and 13 percent for the 4Runner.

At American Honda, volume was down 13 percent at the Honda brand and 3.8 percent at Acura. Four core Honda models -- Civic, Accord, CR-V and Pilot -- each posted declines of 13 percent or more. Still, the company's 2019 sales edged up 0.2 percent, with stronger and record light-truck demand offsetting lower car deliveries.

With car demand plunging 24 percent and light-truck deliveries off 33 percent, volume dropped 28 percent at the Nissan brand and 38 percent at Infiniti last month.

Hyundai's U.S. sales slipped 0.6 percent behind weaker demand for several car and crossover models and sharply lower fleet shipments. Still, the brand posted an overall gain of 3 percent in 2019, reflecting an expanded crossover lineup.

Hyundai Motor America said December retail sales rose 9 percent, driven by demand for the Santa Fe, Tucson, Kona and Palisade utility vehicles, even as the automaker's overall incentives per vehicle fell slightly to $2,796, according to ALG. (See chart below.) Fleet sales dropped 27 percent last month, the company reported.

Subaru posted a rare decline in volume, down 3.4 percent last month and its second monthly drop in eight years, but finished with a gain of 3 percent for all of 2019. Deliveries fell 13 percent at the Volkswagen brand, its fifth but biggest decline of the year.

Smaller brands fared better in December, with volume rising 2.4 percent at Mazda and 10 percent at Mitsubishi.

Among other luxury brands, December volume rose 14 percent at Audi, 16 percent at Porsche, 40 percent at Volvo and 262 percent at Genesis. Deliveries dropped 2.4 percent at Mercedes-Benz, 4.4 percent at Jaguar and 1.2 percent at Land Rover.

In November, U.S. sales hit a record 1.41 million for the month, according to the Automotive News Data Center, likely pulling some volume forward across the industry, analysts said.

Behind strong employment growth and high consumer confidence, American households are still snapping up SUVs, crossovers and pickups, while U.S. tax reform continues to prompt U.S. businesses to replace or expand aging fleets, analyst said.

Tesla Inc. said global fourth-quarter vehicle deliveries rose 23 percent to about 112,000, a record, but the EV maker did not break out U.S. results. The company's U.S. sales dropped 17 percent to 121,000 through November, the Automotive News Data Center estimates, as Tesla accelerated marketing efforts outside North America.

Among major automakers, Subaru, Hyundai Group, Honda Motor, Volkswagen Group, Mercedes and BMW Group gained market share in 2019 while the Detroit 3, Toyota Motor and Nissan Group lost ground.

Fleet factor

Automakers boosted fleet deliveries to offset weaker retail demand throughout the year.

“The fact that new car sales have stayed this strong for this long really defies the odds, especially given that high interest rates and record prices squeezed buyers,” said Jeremy Acevedo, Edmunds’ senior manager of industry insights. “But if 2019 taught us anything, it’s that you can’t underestimate the power of a strong economy.”
 
Record-level incentives

With retail demand softening, in part because of rising new-vehicle prices, automakers have been forced to hike incentives to woo consumers.

Automakers have also been saddled with higher-than-normal supplies of outgoing model-year vehicles, prompting bigger deals on remaining 2019 stock, analysts say.

ALG said December incentives averaged $3,944 across the industry, up 3.6 percent from December 2018, with the Detroit 3 each dangling average discounts of $4,600 or more last month.

Among major, broadline automakers, Nissan Group and Volkswagen Group were also big spenders in December. (See chart below.)

Average incentive spending per unit was on pace to reach a record $4,600 in December, J.D. Power and LMC said, an increase of 6.9 percent, or $296, from a year ago, and eclipsing November’s high of $4,520.

Overall, incentive spending as a percentage of MSRP -- a closely watched measure of financial discipline -- also remains close to 11 percent, the highest level since the 2008-09 recession.

Among the 25 top-selling brands in the industry, all but four -- Cadillac, Jeep, Porsche and Toyota -- are expected to show an increase in overall discount spending, Power and LMC said.
 
Odds, ends

• There were 25 selling days in December, down from 26 in December 2018.
• Average transaction prices in December were on pace to set a record of $34,602, up $673 from last year. The increase is being driven by prices for trucks, crossovers and SUVs, which are expected to reach $36,935, an increase of $655 from last year, J.D. Power said. Average transaction prices for cars are up to $27,461, a small gain of $79.
• Days to turn, or the average number of days a new vehicle sits on a dealer lot before being sold to a retail customer, was 72 days through Dec. 15, J.D. Power said, up five days from a year ago.
• December fleet deliveries are expected to total 259,200 units, up 1.7 percent from December 2018, J.D. Power said. Fleet volume is expected to account for 17 percent of total light-vehicle sales, up from 16 percent a year ago.

 Quotable
 
“When there’s been such a long streak of strong sales, it’s natural to wonder when the other shoe will drop, but we don’t see that happening anytime soon. Financing conditions are already looking much better than they did at the start of 2019, unemployment is at an all-time low, uncertainties around tariffs seem to be somewhat alleviated thanks to the new USMCA agreement, and we’re about to head into an election year, which historically yields stronger sales. Automakers have many reasons to be optimistic heading into the new year.”
    --  Jeremy Acevedo, senior manager of industry insights at Edmunds