As the picture of U.S. auto sales in 2015 was completed, analysts looked at a record 17.5 million vehicles sold and collectively shook their heads. Surely, the common line went, there's nowhere to go but down after a performance like that. Sales must have plateaued, right? How could they possibly get any better?
It's safe, sound logic, no doubt about it. But auto sales have a habit of defying expectations. May saw to that. According to Reuters, new vehicle sales are on the path to yet another record year, despite the fact that a decline in demand for sedans – and two fewer selling days – ensured that sales weren't quite as stunning as they could have been otherwise.
Rising (and falling) fortunes
America's largest automaker, General Motors, reported an 18 percent year-over-year decline to 240,450 vehicles, largely due to a drop in sales of pickup trucks (sales of the popular Chevrolet Silverado fell 12.7 percent from this time last year). Analysts expected to see a dip in GM sales thanks to slowed production of sedans, but the actual slide was slightly larger than many had foreseen.
In May 2015, the Cruze compact sedan was GM's best-selling car. Since then, however, sales have tumbled 30 percent. The mid-sized Malibu has replaced the Cruze atop the sales food chain.
Ford, meanwhile, said its sales slid 6 percent overall to 235,997 vehicles, Reuters reported. Cars were at odds with pickups – sales for Ford cars fell 25 percent, while sales of the beloved F-Series pickup climbed 9 percent. The company's top-selling SUV, the Escape, realized a 5.5 percent sales bump.
GM and Ford's momentary spot of trouble in May shouldn't be taken as a sign that the U.S. auto market is in a rough patch, or at the start of an industry-wide decline. Hardly. Any concern over the apparent weakness of the sales numbers must be put in proper context.
Fewer shopping days in May
Analysts forecasted a drop well before May's actual figures were revealed. A projection from TrueCar, Inc. estimated that total new vehicle sales last month would reach about 1.57 million units, around 4 percent less than the level seen a year ago. That's because May 2016 had two fewer selling days and one less weekend than May 2015.
"Memorial Day weekend kicks off the summer selling season and we see consistent strength in demand, particularly for crossover utility vehicles and pickups," said Eric Lyman, Vice President of industry insights at TrueCar. "The industry is up against a tough comparison with May 2015 – with five weekends then versus four this year – but that doesn't diminish the market's underlying health."
Indeed, there's no one predicting a sales pace below 17 million vehicles for the year. According to a Reuters poll of forty economists, May's seasonally adjusted selling rate will be 17.3 million vehicles, about even with that of April but down noticeably from 17.8 million a year prior. Not everyone agrees with that assessment, however.
TrueCar's estimate calls for 17.8 million units exactly, right in line with 2015's performance. In May, the company estimated that, despite a constrained selling calendar, new vehicle sales generated $51.7 billion – only a 0.8 percent decrease from last year. Stronger average transaction prices last month were largely responsible for the respectable showing.
"The fact that average transaction prices are still edging up underscores continuing health in demand for new cars and trucks," said Lyman.
Looking back, looking forward
It's important to remember when looking at current sales figures that analysts are comparing them to one of the best months for new car sales in 2015. The auto market was running hot in May 2015. The month's seasonally adjusted annual rate was closer to 18 million than 17.5 million, where the year eventually ended.
Beyond the year-to-year comparison, it makes sense that the sales pace would fall off a bit. Great sprinters can only keep it up for so long, after all. But even when they slow down, they're still capable of moving pretty quickly. The same goes for the auto market. It will keep soaring because the average age of the U.S. vehicle fleet – 11.5 years, according to IHS Automotive – demands it.
Drivers eager to get behind the wheel of a new vehicle still have every opportunity to do so. Financing rates are low, incentives are high, and online car insurance is easier to obtain than ever before. Chances are you'll have plenty of company when you go looking.