Life in the fast lane, The Eagles once sang, will surely make you lose your mind. Remind the experts to keep a close eye on the automakers, then. After sales decided to reapply firm pressure to the gas pedal in April, automakers are feeling the wind in their hair once again. By practically all accounts, a record year for profits is back in play for 2016.
According to The Wall Street Journal, U.S. new car and light truck sales hit 1.5 million last month. Not only was that a 3.6 percent increase from one year prior – it was also a new high for the month of April. The seasonally adjusted annual rate of 17.4 million vehicles swiftly reinstalled 2016 on the path to a second consecutive annual sales record.
An extra selling day and five full weekends (since Easter was in March this year) helped push sales higher in April. But there were longer-term factors at work too. Gas prices remain cheap across the country (about $2 on average), and affordable auto financing is easy to come by, Forbes reported. A strengthening economy has also helped convince more Americans to spend.
"Even though Q1 ended with a relatively lackluster March, the industry is still as strong as ever and this month's sales will only reinforce that strength," Edmunds.com analyst Jessica Caldwell told Forbes. "Considering that April is typically the calm before the storm of summer sales, there's every reason to believe that 2016 will be a year for the history books."
After nearly 17.5 million light vehicles were sold in 2015, breaking a record that had been in place for 15 years, many analysts said that sales would inevitably fall. They could only climb so high before hitting a ceiling. Through March, it looked as though those predictions were right. Sales appeared to be winding down, given March's discouraging 16.6 million annual pace.
But, like a shot of adrenaline, April's revival has given automakers new life. Truck and SUV sales deserve much of the credit.
American automakers enjoy solid gains
April was a good month for the Detroit Three. The Wall Street Journal reported that all together, Ford, Fiat Chrysler, and General Motors earned $6.8 billion in operating profit in the first quarter. Fiat Chrysler saw sales rise nearly 6 percent last month to 199,631 vehicles. Jeep and Ram fueled much of the company's growth.
"Consumer preference for SUVs and pickup trucks continued unabated in April," Reid Bigland, Senior Vice President of Sales in North America for Fiat Chrysler, told Forbes.
SUVs and pickups sold at what can accurately be called a torrid pace in April. Ford, whose sales jumped about 4 percent in April, delivered in excess of 70,000 F-series pickups for the second consecutive month. It also sold the most SUVs in the company's history, The Journal noted.
GM was the only major automaker to report a decline (4 percent) in April, though the drop wasn't necessarily due to a lack of interest. That's because GM has been in the midst of a planned reduction of sales to rental agencies. Sales to individuals actually grew by 3 percent thanks to the popularity of brands like Buick, GMC, and Chevrolet.
A global trend
The first few months of 2016 saw instability in some foreign markets send ripples of concern through Wall Street. Stocks slid, homeowners hesitated to sell, and potential car buyers delayed their purchases. Keeping this recent unease in mind makes the global upswing in auto sales all the more impressive. It isn't just the U.S. that's seeing solid growth.
European car sales have been on a steady upward swing for years. The Guardian reported last month that sales of new cars in March were very near pre-crisis levels. New car registrations in the EU, meanwhile, were up 6 percent year-over-year, signaling the 31st month in a row of growth. Markets in the Asia-Pacific region are also making solid gains, even if not at the rate seen a few years ago.
April's reinvigorated sales pace is an encouraging sign to automakers the world over. The Wall Street Journal noted that foreign car companies, many of whom get miniscule profit margins in their domestic markets, depend on the U.S. market for the majority of their business. It certainly appears they won't have to worry about diminished profits anytime soon.