Three big questions about 2016 U.S. automotive sales were on bold display in the month of March — and the answers provided a signal that perhaps the market is at or near a volume peak:
1. Has pent-up demand for vehicles finally worked its way through the market? Are all those car and truck purchases that were delayed through the long US recession now in the review mirror? March’s dip in vehicle sales volume would seem to answer that question.
2. Will the ever-expanding length of vehicle ownership (11+ years) result in downward pressure on new vehicle sales, as consumers hold on to their cars for longer lifespans? Somewhat related: will the growth of average vehicle loan term (now at 66 months) also create too much “upside-down” in the market to support continued robust sales growth? The verdict is still out on these two questions, but again, March’s dip may be symptomatic of these lengthening horizons.
3. Last but not least, how will automakers respond with incentives spending during 2016 to counteract the potential plateauing or decline of sales volume?
March’s results definitely came in under expectations — with the SAAR pace dropping by nearly 1M vehicles from February. This sheds some light on the questions above. Yet analysts are projecting a vigorous bounce-back during April because of the extra weekend of sales potential (vs. April 2015).
Almost all major automakers reported declines in year-over-year DSR*, and even with March picking up two extra selling days versus a year ago, some brands saw actual volume decreases despite the extra time. The U.S. market as a whole had a 4.7% decline in DSR* during March 2016.
Low fuel prices once again had an impact on the light truck / car balance, as passenger car sales continued to show share declines versus light trucks and utility vehicles.
Your ESA Car Keys recap follows.
MARCH 2016 HIGHLIGHTS
Wards Auto and NADA MarketBeat
- March SAAR: 16.46M units
- March Units: 1.59M vehicles sold
- Change: DSR* -4.7% | Volume +3.0% vs March 2015
- Gainers (by volume): Light Trucks +2.9%, CUVs +1%, Fiat-Chrysler +0.2%
- Laggards: Most auto brands were down year-over-year in DSR*. Notables include: GM -6.9%, Toyota -9.9%
*DSR: Daily Sales Rate. A more reliable indicator of the pace of auto sales which accounts for actual car-selling days per month.
*SAAR: Seasonally-Adjusted Annual Sales Rate.
SOURCES: NADA MarketBeat, Wards Automotive, Automotive News.
Dave Eckstein is a Partner in the firm ESA & Company. He specializes in highly profitable market share growth for local businesses and gets a kick out of demonstrating a declining cost of customer acquisition. He plays baseball, but isn't that Dave Eckstein.