After Ford warned that North American auto sales had reached a plateau a few months ago, December 2016 auto sales blasted through that plateau to reach all-time record highs. At a seasonally adjusted selling rate of 18.4mm units, the December SAAR broke through the "plateau" of 18.0mm units set in November of last year...
..and narrowly exceeded the all-time high 18.2mm SAAR level first set in September 2009 (with the exception of a couple of blips in the mid-80s).
Meanwhile, every auto OEM blew through selling estimates for the month while GM's chief economist assured us that the "U.S. auto industry remains well-positioned for sales to continue at or near record levels in 2017.”
“Key economic indicators, especially consumer confidence, continue to reflect optimism about the U.S. economy and strong customer demand continues to drive a very healthy U.S. auto industry,” said Mustafa Mohatarem, GM’s chief economist. “We believe the U.S. auto industry remains well-positioned for sales to continue at or near record levels in 2017.”
Light truck sales were the real winner of the month, surging nearly 13% on a seasonally adjusted annualized basis, as people went all-in on their bets against oil prices recovering in the near future.
As Bespoke pointed out, Ford's sales of its F-Series pick-up truck reached a level in the last two months of 2016 that it had only hit one other time over the prior 20 years.
— Bespoke (@bespokeinvest) January 4, 2017
Meanwhile, car sales dropped 9.6%.
Investors seemed to like what they saw.
But it wasn't all great news. GM massively exceeded their sales target, at least in part, courtesy of a 2.3% YoY increase in incentive spending which reached a level equal to 13% of the company's average vehicle transaction price. With an average gross transaction price of $41,823, that means GM offered average discounts of $5,437 per vehicle.
Meanwhile, GM's inventory also increased 10 days YoY to 71 days of supply. To put that into perspective, GM had 630,950 unsold cars sitting on dealer lots at the end of December 2015 but that rose to 844,942 cars as of December 2016, a 214,000 unit increase YoY.
And, overall industry inventory levels continue to hover near 5-year highs...
As we've noted before, industry volumes continue to be propped up by low interest rates and deteriorating lending standards with term structures being stretched about as far as they can be.