November Shift to Light Trucks Good News for Detroit
Fleet sales boost Ford's numbers but nick GM's results.
November U.S. light-vehicle sales came in at good levels as Americans continue to move away from sedans and into light-truck models. This mix shift is especially good news for the Detroit Three--each has a U.S. light-truck mix of over 70%.
Both Novembers had 25 selling days. November sales, excluding Nissan which had a technical problem, rose 1.1% year over year. GM estimated the seasonally adjusted annualized selling rate, SAAR, at 17.4 million compared with 17.83 million in November 2016.
November consumer confidence hit a 17-year high, interest rates remain low, product is more high-tech than ever, and the fleet remains old at over 11.5 years, so we see no reason to be fearful about 2018 demand. However, we continue to believe that U.S. light-vehicle sales peaked for this cycle in 2016 at 17.54 million.
Off-lease volume for this year will likely be about 3.6 million vehicles. We’ve seen recent forecasts for 2018 of 3.9 million and a peak of about 4.3 million in 2020. This extra supply in our view will only drive down used vehicle prices further and take more consumers out of the new vehicle market next year in favor of used. Leasing appears to also have a reached a peak for this cycle and was already quite high at about 30% of new vehicle sales, so we think contraction year over year is more likely than growth.
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