US Auto Sales Slide in 2017 for the Detroit Three

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Not all the scores are in yet, but it is clear that 2017 will be the first year since the financial crisis when year-over-year sales of new cars have dropped. Industry analysts at J.D. Power are expecting total 2017 sales of 17.2 million vehicles, down 6% from 2016’s record pace of 17.6 million units.

General Motors Co. (NYSE: GM) reported full-year sales of 3.002 million units, down 1.3% compared with 2016 sales. Ford Motor Co. (NYSE: F) said sales dropped by 1.1% to 2.587 million units, and Fiat Chrysler Automobiles N.V. (NYSE: FCAU) posted a drop of 8% to 2.059 million units. As a group, the Detroit Three sold about 7.65 million units in 2017, a year-over-year decline of about 3.2%.

Partly the drop in volume was the result of too many passenger cars on dealer lots when most buyers were looking for sport utility vehicles and pickup trucks. This mismatch had the advantage, for carmakers, of keeping prices — and margins — high on the popular vehicles while being forced to move automobile inventory any way they could.

According to Kelley Blue Book estimates, the average transaction price for a full-size pickup rose 0.9% year over year in 2017 to $47,333 in December. The best-selling compact SUV/crossover segment is estimated to post an average selling price of $28,470 in December, up 2.5% compared with December 2016’s average. Only luxury vehicles and sports cars claim a higher year-over-year percentage increase.

December sales of full-size pickups were up 2% at Ford, up 24.7% for the Chevy Silverado and 13.5% for the GMC Sierra. Ram sales dropped 7% in December. In its announcement today, GM said 78% of its retail sales and now trucks and crossovers compared with an industry average of 65%.

For the full year, Ford’s F-Series posted a sales gain of 9.3% compared with a gain of 1.9% for Silverado, a gain of 2% for Ram and a dip of 1.7% for Sierra.

Year-over-year sales are expected to be lower again in 2018, coming in at around 16.7 million, according to an estimate from Cox Automotive, parent of Kelley Blue Book. GM’s chief economist, Mustafa Mohatarem, thinks 2018 will be a little better than that as a result of the recently passed tax legislation:

In 2017, we had solid GDP growth and good news on employment, wages and consumer sentiment, which helped deliver very strong retail sales for the auto industry. This year, many consumers will see their take-home pay rise because of tax reform. That will keep the broad economy growing, and help keep sales at very healthy levels even as the Fed increases interest rates.

Investors seem to understand what’s happening with new car sales and pushed share prices for all three U.S. carmakers higher following this morning’s report. Expectations for 2018 have been set slightly lower, which gives the automakers some room to exceed those expectations.

Of these three automakers, GM may have finished the year in the best position, with big sales on its Silverado, Equinox, Sierra, Yukon and Traverse models, and an inventory that has been shaved mercilessly over the past half of this year.

Ford is still the undisputed leader in pickup sales, but SUV sales were up just 3.1% year over year in 2017 and the company needs to do better with its Escape. Explorer sales were up 10.1% year over year, but Escape sales were essentially flat, and a 13% dip in Expedition sales offset a 6% gain in Edge sales.

As for FCA, Jeep and Ram carry the ball, and Jeep has been losing ground. FCA absolutely has to turn that around. 2017 Jeep sales fell 11% compared with 2016, largely as a result of the company’s decision to kill the Patriot and focus on the Compass. This sent Patriot sales plunging by two-thirds while Compass sales declined by 11%. The Grand Cherokee, with a year-over-year sales jump of 13%, needs some help.