DETROIT (Jan. 12, 2017) — U.S. light-vehicle sales hit a record of 17.5 million units in 2016, the seventh straight annual sales increase, with light truck sales accounting for all of the growth as car sales slid their lowest volume since the early 1960s.
While the 2016 total is a mere 0.3 percent ahead of 2015, it's still a record. And the streak is the longest the U.S. auto industry has experienced in a century.
The 2016 record is due in part to frenzied sales activity during the last few weeks of the year, records show, but this surge could mean a bigger U.S. sales slowdown than usual in January, which has been the weakest month in each of the past eight years.
Auto makers sold more light trucks in December than any month in history, as heavy year-end incentives propelled the U.S. industry to a second consecutive annual record — though just by a hair.
Most analysts are forecasting a slight decline for the industry in 2017. But few saw 2016 finishing as strong as it did, and there's considerable uncertainty about how consumers and the industry will react to Donald Trump's actions after he's sworn in as president this month.
"A three-peat is possible, if not probable, if Wall Street, consumer confidence and the economy continue to respond favorably to the incoming administration," said Rebecca Lindland, senior analyst for Kelley Blue Book.
"There are a lot of old cars on the road still and a lot of new technology awaiting shoppers in today's showrooms."
Two big reasons why 2016 sales reached record territory were trucks and incentives. Last month's sales, which marked the best December ever, included nearly 1.1 million light trucks, about 18,000 more than in July 2005, when the Detroit 3 offered employee pricing to all customers.
The year ended with light trucks topping 10 million units for the first time and accounting for an unprecedented 60.7 percent of sales. As recently as 2013, the market was split 50-50 between cars and trucks. That was before low gasoline prices and new products combined to create insatiable demand for big vehicles.
Meanwhile, car sales fell to 6.9 million, the fourth-lowest total since 1962.
As demand started to plateau in the middle of 2016, auto makers began piling on more incentives to keep inventories moving. In December the discounts were about 20 percent larger vs. a year earlier, according to ALG and Autodata. Sales in December rose 3 percent.
While that's a questionable return on investment for some automakers, the gain gave the industry a full-year total of more than 17.5 million sales, beating 2015's record tally by 56,211 units.
The need for high incentives could mean more production cuts in 2017. General Motors Co. already has announced plans to eliminate shifts at three U.S. plants in the first quarter. But no one expects sales to fall below 17 million, which would still make it one of the five best years ever.
"Key economic indicators, especially consumer confidence, continue to reflect optimism about the U.S. economy and strong customer demand continues to drive a very healthy U.S. auto industry," Mustafa Mohatarem, GM's chief economist, said in a statement.
"We believe the U.S. auto industry remains well-positioned for sales to continue at or near record levels in 2017."
This story contains additional information gleaned from autonews.com, the website of Automotive News, a sister publication of Tire Business.