What was widely expected to be a bad year for the U.S. auto industry turned out to be anything but.
Though General Motors, Ford and Toyota all reported weak December sales, 2018 saw an overall increase in new vehicle demand, a surprise for industry analysts and planners who had forecast sales to decline for the second year in a row. At the same time, new car prices soared to record levels, helping buoy the industry’s collective bottom line.
But that might not be entirely good news. Some are warning that the industry may be pricing many buyers out of the market, a situation that could become all the worse if the current downturn in the stock market spreads from Wall Street to Main Street.
“It wouldn’t take much to put us into a pretty nasty recession” that would see a sharp tumble in 2019, warned analyst Joe Phillippi of AutoTrends Consulting.
Final 2018 sales numbers are expected to keep trickling in through at least Friday, but the general consensus is that demand ever so slightly exceeded the 17.2 million figure set the year before. Edmunds.com, which early in 2018 predicted an annual decline by several hundred thousand vehicles, now estimates the final sales tally at 17.3 million.
The domestic auto industry was buoyed by the boom in light trucks that grew to account for more than two-thirds of overall sales. The newly redesigned Jeep Wrangler, for example, set a record with sales of 240,032, up from 202,266 the year before. Ford, meanwhile, sold nearly 1 million F-Series pickup trucks.
“This year’s performance underscores the efforts we undertook to realign our production to give U.S. consumers more Jeep vehicles and Ram pickup trucks,” said Reid Bigland, who heads sales operations for Fiat Chrysler Automobiles.
The automaker has dropped almost all of its passenger car models over the last several years and is not alone in shifting to light trucks. Ford will retain only the Mustang coupe by decade’s end. General Motors will drop six once-popular sedan models in 2019.
The massive market shift is one of the key reasons why new vehicles have been growing markedly more expensive — though higher prices also reflect buyer demand for better-equipped products, as well as “headwinds,” in industry speak, such as higher raw metal costs resulting from tariffs implemented by President Donald Trump on imported aluminum and steel.
The average transaction price of a new vehicle — what buyers actually pay after factoring in options and discounts — surged to $37,577 in December, up 1.3 percent from the year before.
For Toyota, despite a slight dip in sales for December, General Manager Jack Hollis was upbeat, predicting “sales momentum (will be) carrying over into the new year.”
Barring an economic meltdown, most experts are singing that same tune, though they do warn of several potential road hazards ahead, including “headwinds from higher interest rates and more nearly-new competition in the used market," said Jonathan Smoke, chief economist at Cox Automotive.