Fueled by low gasoline prices and easier credit, the U.S. auto industry pulled its recent winning streak into 2015 with a nearly 14% January sales increase and over half of sales comprised of high priced pickups and sport-utility vehicles.
The momentum, which includes double-digit percentage sales increase for each of the Detroit Three car makers compared with the same period a year ago, continues the upturn’s major trends: U.S. demand for trucks and sport-utility vehicles are skyrocketing amid $2-per-gallon gasoline, boosting transaction prices and margins at a time when the rest of the global auto industry offers little profit potential.
Those industry gains are coming at the expense of one of the goals Washington had when it bailed out General Motors Co. and Chrysler Group late last decade. Envisioning a much more fuel-efficient auto industry, President Obama set a goal of 1 million electric vehicles on the road by 2015.
The market likely will fall well short of that despite tax incentives and ample installed electric-vehicle capacity in American automobile factories. Sales of light trucks and SUVs in January grew 19.3%, representing 54% of the sales mix, according to researcher Autodata Corp. Passenger cars grew at a more modest 7.7% and, of those, electrified vehicles represented well under 1% of sales.
“The American people love their trucks,” said Mike Jackson, chief executive of No. 1 U.S. dealer chain AutoNation Inc. “This decline in gas prices is a definite plus for the industry both in consumer attitude and the type of vehicles they buy.”
GM, the largest U.S. auto maker, reported an 18% sales increase in sales compared with the same period in 2014. The growth is coming on the back of redesigned trucks and SUVs that made their debut last summer just as oil prices were beginning to point downward. GM pickup truck sales increased 43% last month and SUV demand increased 36%.
Sales of the auto maker’s Escalade luxury SUVs jumped 171% while its plug-in hybrid Chevrolet Volt, cited by President Obama in 2011 as an example of where the industry needed to head, fell 41% over the same period.
Nissan Motor Co. ’s Leaf electric car fell 14.5%, and Tesla Motors Inc. ’s Model S are estimated to have been flat, said analysts who project the Silicon Valley auto maker’s sales.
Ford Motor Co. notched the highest January sales for its F-series pickup trucks since 2004 despite supply limitations. The Dearborn, Mich., auto maker post a 15.6% gain for the month. Fiat Chrysler Automobiles NV’s rugged Jeep brand sold 51,523 vehicles, more than Volkswagen AG’s VW and Daimler AG ’s Mercedes-Benz brands combined.
The shift supports the business model for many of the auto makers doing business in the U.S. In most of the global auto industry outside of China, making money remains difficult, forcing many to continue relying on North America for most profits. The strong dollar has helped importers, including Fuji Heavy Industries Ltd. ’s Subaru and BMW AG earn fat margins on cars imported from Europe and Asia.
All these sales are generating jobs at U.S. auto plants that are humming at some of the highest capacity-utilization rates in the history of the industry. Success of models like Ford’s F-150 or Jeep’s Wrangler has prompted the hiring of tens of thousands of auto workers at domestic factories since the last contract with the United Auto Workers union was signed in 2011.
Chrysler on Tuesday said it would pay UAW workers $2,750 in profit-sharing for 2014, the highest for the auto maker’s blue-collar employees in several years. Ford last week said it would pay $6,900 in profit-sharing. GM will disclose its UAW payout when it announces fourth-quarter earnings on Wednesday.
Toyota Motor Corp., the world’s largest auto maker by sales, also reports earnings on Wednesday and against the backdrop of a steep increase for its three U.S. brands, which together rose 16% to 169,194 vehicles during the month.
“Consumers feel good because more people are working, the U.S. economy is expanding and fuel prices are low,” GM sales chief Kurt McNeil said. GM’s average transaction prices hit $34,800 a vehicle in January, up $2,400 compared with year ago.
“Low fuel prices provide a significant boost to consumer disposable income,” Ford economist Emily Kolinski Morris said. She noted low interest rates are also helping, and “are likely to remain a prominent feature of the near-term outlook.”
While January’s industry tally was hot, it was a bit weaker than the headline numbers suggest due to one more selling day this time around. And, the comparison to January 2014 was further aided by the storms and cold spell that crippled large parts of the nation a year ago.
The annualized pace of sales increased 9% during the month, according to Autodata. If seasonal factors remain the same over the next 11 months, full-year sales would exceed 17 million for the first time in more than a decade.
The fundamentals of the industry remain strong, analysts and auto executives said. Auto makers, helped by plant closures and restructuring during the recession, are now in a far stronger position to manage fluctuations in production demands.
Factory utilization, for instance, is at an all-time high, according to researcher WardsAuto.com, helped by recession-era plant closures and restructurings. That high utilization keeps unsold-car inventories in check, reducing the temptation to flood the market with vehicles no one wants to buy and lessening the need for large-scale discounts.
Automotive information provider Kelley Blue Book said transaction prices of new light vehicles overall are up 5% compared with a year ago to $33,993, although they fell 1.7% from December. TrueCar estimates average incentive spending, including rebates and discounts, was $2,642 during the month, up 3.6% over the same month a year earlier.
Among other major car makers, Nissan reported sales up 15% to 104,107 vehicles. Hyundai Motor Co. said its U.S. sales were up 1% over a year ago to 44,505 vehicles.