- Business Insider
Automakers reported February US sales on Wednesday, and while they weren’t stunning, they were on pace to equal 2016’s record of 17.55 million.
The current sales boom has been ongoing for the past three years. A record was set in 2015, when 17.5 million cars and trucks rolled off dealer lots, and that record was promptly beaten in 2016.
The staying power of the boom, combined with memories of carmakers competing away their profits on incentives to hold or gain market share, has led to a solid 24 months of regular speculation that the automakers are cruising for a bruising.
Obviously, those concerns are unfounded. Furthermore, the sales boom has been accompanied by a resurgence of SUVs, which are far more profitable than passenger cars (this trend has been driven by low gas prices). As a result, the GMs and Fords of the world have been raking in cash.
Morgan Stanley lead auto analyst Adam Jonas published a succinct postgame note on Thursday in which he zeroed in on the magical combination of booming sales and SUVs.
“Can Mix Save the US Auto Market in 2017?” his title asked?
The answer: “February [sales pace] at 17.6mm was even stronger than it looks when considering segment and channel mix. The incremental US auto buyer is a retail SUV/pickup consumer. OEMs can live well on this.”
OEMs can live well on this – that’s the salient language. (An “OEM,” by the way, is an “original equipment manufacturer,” which includes major global automakers).
Basically, the continued strong pace of sales, even with rising incentives and some inventory issues, is undermining the naysayers. But even if sales did slacken, as Jonas points out, the mix – pickups and SUVs – bodes well for continued prosperity in the US auto market.