Nissan is enjoying a nice surge in sales during the first half of 2016, in part due to its new ads and in part due to an improving economy.
A full range of manufacturers such as Ford, Fiat Chrysler, Volvo, Jaguar Land Rover, Nissan, Kia and Honda posted strong results for the first and while the year-over-year sales increases have slowed dramatically overall, the industry is still expected to set a new all-time sales record by the end of the year.
Stephanie Brinley, an analyst of IHS Automotive, said IHS has seen no reason to change its forecast of total sales for 2016. IHS expects sales of 17.64 million units, which would be a new all-time record.
At the same time, average transaction prices continue to creep upwards despite an increase in incentive activity, which was evident during the Fourth of July Holiday as manufacturers such as Mercedes-Benz and Buick advertised deals.
In addition, the long-delayed, but much-anticipated, entry of younger millennial buyers is re-shaping the market. The hottest segment, according sales executives such as Mike Manley of Jeep, is the compact crossover segment favored by millennials that boosted sales of Fiat Chrysler, Ford, Honda, Nissan and Kia, which saw their sales increase during the first half of the year.
Meanwhile, brands such as Toyota, BMW and Mercedes-Benz, which have been long favored by their baby-boomer parents, lost sales during the first six months of 2016. BMW, which sailed through the 2008-2009 recession and seemed impervious to market shifts, was one of the big losers during the first half of the year. BMW sales tumbled 9% during the first six months of 2016 and the Mini brand sales tumbled by 17% during the first half of the year. Mercedes-Benz sales were flat.
Volvo and Jaguar Land Rover clearly benefited from the weakness of BMW and Mercedes-Benz, as both posted double-digit sales increases. In fact, Volvo was the big winner in the first half posting a 25% sales increase, according to AutoData. JLR sales were up 19%.
(New vehicle sales regain some momentum in June. For more, Click Here.)
“We are very pleased with the initial sales success of the Jaguar F-Pace and XE, which have expanded the brand into two important and growing luxury market segments, and put Jaguar on a path for strong year-end sales results,” said Joe Eberhardt, president and CEO, Jaguar Land Rover, North America, LLC. “The Land Rover brand continues its momentum from a record setting 2015 achieving sales success with Range Rover Sport and Discovery Sport.”
Despite a continuing display of bravado about its decision to slash deliveries to rental fleets, General Motors saw its sales fall during the first half of the year, while Ford and FCA also picked up market share, largely at GM’s expense.
Hyundai and Mitsubishi also posted sales increases for the first half of the year but Mazda lost ground despite the introduction of new products.
“The average transaction prices are up 2%, demonstrating strong consumer confidence in the minds of new-car buyers. Consumers are riding the waves of low gas prices, low interest rates, and available credit and manufacturers are launching exciting new products, creating a perfect storm of continued momentum for the industry.” according to Rebecca Lindland, an analyst with Kelley Blue Book.
New-vehicle retail transaction prices thus far in June are at an all-time high for the month at $31,089. The previous record was $30,202, set in June 2015. Incentives are also at a record high for the month of June at $3,278 per vehicle, $119 per vehicle more than the previous high in June 2015, according to J.D. Power & Associates.
(Click Here for details about the Tesla driver death while on AutoPilot.)
“A widening range of SUVs and crossovers to choose from based on price, size and seating configurations, combine with easy availability of credit, whether for a loan or a lease continues to drive the industry forward with the Brexit situation having little impact for the moment,” said Tom Libby, an analyst with IHS Automotive.
The near-term looks rosy for sales as well as qualified buyers are coming out to make purchases and the economic outlook is positive.
“Overall the consumers’ credit picture is very good,” noted David M. Blitzer, managing director and Chairman of the Index Committee at S&P Dow Jones Indices. “Consumer credit default rates continue at the lowest levels in more than 10 years and well below those seen before the financial crisis.
“These positive developments are supported by continued gains in the economy: an unemployment rate under 5%, combined with increases in incomes and wages and stable prices. Debt service ratios remain close to record lows, while outstanding consumer credit and mortgage debt have risen modestly this year,” he said.
However, automakers need to be vigilant to ensure profitability.
“We have seen a slowdown in retail demand since April, posing a significant challenge to manufacturers on a volume basis. Despite sales slowing down, consumer spending remains at record levels due in large part to a continued shift from cars to trucks,” said John Humphrey of J.D. Power & Associates.
(New study says three of four American motorists want autonomous vehicles. Click Here for more.)
“The key going forward will be to what degree automakers are able to adjust production levels to slowing demand rather than relying on profit-damaging incentives to move inventory.”