Though US new vehicle sales puttered along for most of the year, a strong showing in December has given automakers yet another record breaking sales year for 2016.
The increase in sales was not drastic by any means, at a mere 0.3% over the figure from 2015. What is of note is that this marks the 7th straight year of increased new car sales. These words are music in the ears of auto recycling specialists across the country.
Most of the time, a new car sale contributes, either directly or indirectly, to the retirement of a used vehicle. More new car sales equal more used cars to salvage and recycle. The increased volume of salvage vehicles allows auto recycling pros to fine tune their inventory to suit the demands of their target market. The increased availability will almost certainly lead to increased sales for the auto parts recycler.
The news of increased new car sales in 2016 has to be taken with a grain of salt unfortunately. Although the number of new vehicles sold did increase, many of these sales can be attributed to ghost buyers. News headlines recently revealed the shady practice allegedly employed by some automakers of inflating new car sales by encouraging larger dealerships to purchase vehicles from themselves. Dealers would then be able to sell them in adjacent used car lots. Dealers were allegedly offered manufacturer bonuses and awards based on these “sales”, but the vehicles never actually make it on the road. There are other less elicit circumstances in which a new car sale does not translate to a vehicle that is actually in full time use by a consumer, such as rental car fleet sales and test vehicles purchased by independent test agencies.
The other factor to consider is that almost all automakers make heavy use of incentives and rebate offers to entice new buyers. This is easily evidenced by the surge in sales in November and December of 2016. Often, the year-end incentive programs of popular automakers can save buyers thousands. For December 2016, the average incentive granted was over $3,000. This represents a 20 percent increase from December of 2015. In the case of some low-margin vehicles, dealers are actually selling vehicles at a net loss in order to move units. December was a big month for all automakers, with General Motors and Volkswagen seeing the biggest upward swings for the month.
As much as the new car sales numbers may be a little murky, there is an undeniable uptrend in the sales of new cars that has been trending upward since 2008. Interestingly, many notable automakers actually posted modest losses for the year. In fact, of the notable popular automakers, only Nissan and Honda actually posted positive sales numbers for 2016 with gains of 5.4 percent and 3.2 percent respectively. Of the automakers posting losses, they were all very modest, with Toyota posting the biggest losses at around 2 percent.
As the industry continues to stabilize and move forward from the crisis of the early 2000’s, consumers are also gaining confidence in the economic outlook of the country and their families. This all translates to good news for auto recycling, as more cars on the road means more parts that will be eventually required to repair those cars. Also, as vehicles become more and more complex, there will be a continued need for the unique OEM modules and components that are not easily found in the aftermarket.
As TPP, Trump, and Uber continue to change the focus of our economic, political, and social outlook, the future of the automotive industry may be a little uncertain for the near future. But, if trends show us anything, it is that Americans still love their cars and will likely continue buying them.