Auto sales expected to top 17 million vehicles for fifth consecutive year

Detroit — For the fifth year in a row, U.S. auto sales are expected to top 17 million vehicles.

Purchases of new vehicles in 2019 are expected to decline slightly from the previous year, but not to the extent analysts initially thought.

A strong economy led to solid consumer confidence, and in turn, a robust year for automakers and dealers. They were able to beat sales forecasts during a tumultuous year marked by labor negotiations that led to a 40-day strike against General Motors Co., and by tough trade talks leading to uncertainty in the economy and the industry. 

"It's just interesting ... you take that uncertainty they have dealt with and everything that’s been going on, and they have cranked out another 17 million in sales," said David Kudla, CEO of Grand Blanc-based Mainstay Capital Management LLC. 

"As long as the economy is good ... the demand is going to be there."

Auto analysts expect sales to surpass their expectations at 17.1 million, down 1.3% from 2018's 17.3 million. For the fourth quarter — which was plagued by the strike that cut GM's production by 300,000 vehicles — analysts expect sales of 4.3 million, down about 1%.

Domestic and foreign automakers are expected to release their auto sales figures in the coming days. GM and Fiat Chrysler Automobiles say they'll disclose their numbers Friday; Ford Motor Co. will follow on Monday.

The year started with economic uncertainty caused by the longest government shutdown in U.S. history, tariffs on China's goods, and higher interest rates, noted Jeremy Acevedo, Edmunds senior manager of industry insights. The uncertainty showed in slower sales of about 4 million during the first quarter. 

"But consumer confidence made a comeback," Acevedo said. "Right around the midway, they managed to flip a switch."

Sales came in at 4.4 million in the second quarter and 4.3 million in the third. The Federal Reserve's decision to cut the benchmark interest rate in July for the first time in a decade helped, Acevedo said. The Fed cut rates for the third time this year in October because of the risk to the economy from trade talks and slowing growth globally.

But unemployment levels are at a 50-year low and housing sales have remained above 700,000 for the last four months, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

"Last year at this time, the pundits and the economists were talking about a recession … we are very far from it. We are nowhere near a recession right now," Kudla said. "We have a very strong economy. You look at all these factors and we continue to be in a good environment for autos."

Also helping the auto industry this year were tax benefits for companies looking to update their fleets, leading to increases in fleet sales, noted Michelle Krebs, executive analyst for Autotrader, a Cox Automotive company.

It was the year of the pickup truck wars with the all-new Chevrolet Silverado and the latest model of the Ram hitting showrooms. Ram is fighting with Chevy for second-place in the Detroit Three truck battle, a ranking it has never won. The battle will continue in 2020 with the coming of a new Ford F-150, the perennial sales leader.

"We have been predicting truck wars for the last couple of years and it was full-blown this year," Krebs said.

The year was also dominated by SUVs, which are expected to take more than 50% market share for the first time ever during the fourth quarter. In a level not seen since 2005, pickup trucks are likely to hit a market share above 19% in the quarter. Meanwhile, the market share for passenger cars, which Detroit automakers have slashed from the lineups, is expected to hit an all-time low of about 26% in the fourth quarter, according to Edmunds.

For the 2020 model year, several cars have hit the end of the road, including the Ford Taurus and Fiesta, and the Chevrolet Cruze and Impala. 

"We had a huge year in terms of car departures," Acevedo said. "There have been SUVs there to fill in the gaps."

Analysts predict 2020 will be another solid year for auto sales — and possibly another year above 17 million. Edmunds estimates sales will come in at 17.1 million because financing conditions are better, unemployment is expected to stay low, there's a new trade agreement with Mexico and Canada, and phase one of a new trade agreement with China is coming.

Cox Automotive analysts are not so optimistic. Their forecast is for sales to fall to 16.7 million. Retail spending started to slow in the fourth quarter and consumers may be unable to carry the economy in 2020 like they did in 2019, said Jonathan Smoke, chief economist for Cox Automotive.

"Consumers tapped a record amount of non-housing debt to keep spending on big-ticket items, including automobiles," he said in a statement. "And that debt started to show signs of worry through rising severe delinquencies and defaults as we reached the end of the year."

While auto analysts have never predicted a sales collapse, they have expected a slowdown for years. With sales at more than 17 million over the last five years, analysts expect that at some point, the pent-up demand that existed after the recession will be fulfilled.

"What everybody is waiting on is for the other shoe to drop. If something tilts us into recession, we can see that number erode very quickly," Kudla said. 

"If we just continue along where demand is finally just soaked up, we can see this slow erosion in sales."

khall@detroitnews.com

Twitter: @bykaleahall