Auto sales notch all-time high in 2016

Americans bought more new vehicles in 2016 than in any previous year, aided by a strong U.S. economy, easy credit and rising discounts, figured released Wednesday show.

The U.S. auto industry broke the record set in 2015, as sales rose 0.4% from 17.48 million vehicles to 17.55 million, according to Autodata.  But in 2017, the industry's streak of seven consecutive sales increases is likely to come to an end. Most industry executives and analysts say that rising interest rates and gas prices, combined with an end to pent-up demand, will cause industry sales to drop slightly.

Industry sales were pushed to new heights by a strong showing In December, when sales rose 3.1% to 1.69 million vehicles, compared to a year earlier, according to Autodata. The big finish to the month reflected many discounts to clear cars off the lots and fight rising inventories.

"Overall, it was a very, very strong year for the industry," said Alec Gutierrez, senior market analyst for Kelley Blue Book. "But inventory was outpacing demand at the end of the year, causing higher incentives."

The Detroit Three automakers -- General Motors, Ford Motor and Fiat Chrysler Automobiles -- all beat expectations in December. GM sales rose 9.9%, crushing Edmunds.com and Kelley Blue Book projections of 3.1% and 3.7%. Ford sales gained 0.1%, beating expectations of a decline. And Fiat Chrysler sales fell 8.8%, slightly better than expected as the company reduces its reliance on fleet sales, which are less profitable than sales to retail customers.

Toyota Motor's U.S. sales were up 2% for December. Honda Motor saw sales rise 3.2% from a year earlier. December sales rose 6.4% to 160,477. Nissan recorded a sales increase of 9.7%, compared to a year earlier.

Volkswagen's namesake brand fell 7.6% in 2016 as its dealers were not allowed to sell diesel vehicles and had to address the damaging effects of its emissions scandal. The brand enjoyed a gain of 20.3% in December to 37,229 units, although an increase in incentives helped.

In other good news for the industry, consumer can't get enough of big, fuel-thirsty vehicles. In 2016, consumers abandoned cars in droves, flocking to crossovers, pickup trucks and sport-utility vehicles as low gasoline prices undermined small vehicles and hybrids.

The automotive market is experiencing  "one of the biggest shifts in consumer preferences we’ve ever seen in the industry," Toyota U.S. sales chief Bill Fay said, referring to the movement away from cars.

Toyota sold more crossovers, pickup trucks and sport-utility vehicles than cars in 2016, Fay said. For example, the Prius hybrid, long considered a jewel of Toyota's small-car lineup, slumped 26.1% in 2016, outsold by the Tacoma pickup truck. An expansion at a plant in Mexico will provide additional annual production capacity of 60,000 Tacoma units, Fay said.

Consider Nissan, for example. Nissan's most popular vehicle is now the Rogue crossover. The Rogue posted a 2016 sales increase of 14.9% to 329,904 units, while the previous leader, the stalwart Altima sedan, declined 7.8% to 307,380.

Those big vehicles carry higher price tags and sometimes cost less to produce than the compact and midsize cars in favor in the past, making sales more profitable.

The average amount that consumers paid for new vehicles hit an all-time high of $35,309 in December, up 1.5% from a year earlier, according to Kelley Blue Book.

But concerns about a glut of production capacity is leading to cutbacks.

GM said in November it would cut the third shift of production at the Lordstown, Ohio plant, which makes the compact Chevrolet Cruze. It's also cutting jobs at the Lansing, Mich., plant where it makes the Chevy Camaro and the Cadillac ATS and CTS.

Ford has also cut back on production at assembly plants in Kansas City, Mo., and Louisville, Ky., along with two plants in Mexico.

"Certainly we have adjusted to the waning demand of cars in the marketplace as more people have rotated into SUVs," Ford sales analyst Erich Merkle said.

With unwanted cars aplenty, industry discounts rose 20% in December, compared to a year earlier, to an average of $3,673 per vehicle, according to TrueCar.

Contributing: Detroit Free Press reporters Brent Snavely and Greg Gardner

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.


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