Selected SLC Research
Policy Analysis | January 29, 2016
Vehicle Sales Soar to Record Levels in 2015
In 2009, the American auto industry was enfeebled and on the verge of collapse.* Not only had auto production and sales cratered at a dizzying rate, tens of thousands of Americans were being laid off from jobs in various aspects of the industry. Presidents Bush and Obama’s efforts to revive the industry by injecting emergency bailout assistance also faced intense opposition, with widespread calls for the federal government to refrain from intervening and infusing critical funds to resuscitate the industry. However, the emergency federal funding proved to be tremendously important in turning around the fortunes of General Motors and Chrysler, and their revival generated a panoply of positive effects for the nation’s other major industry producer (Ford). The dozen or so foreign automakers operating largely in the SLC states also benefitted from the improving national and regional economic picture on the automotive front and demonstrated strong progress in terms of production, sales and expansion.
Fast forward to 2015 and a review of the industry’s performance indicates stunning progress. By the end of the year, according to Autodata, the United Kingdom-based supplier of technical information to the automotive aftermarket, U.S. sales of light vehicles soared to 17.47 million vehicles, eclipsing the previous record reached in 2000 of 17.41 million vehicles. According to WardsAuto, the Michigan-based provider of the latest news, data and analysis in the auto industry, 2015 vehicle sales, based on their compilation, registered at 17.39 million vehicles, an increase over the previous record of 17.35 million reached in 2000. Table 1 presents a graphical demonstration of vehicle sales between December 2014 and December 2015. Regardless of the slight discrepancy in these numbers, the indisputable fact is that 2015 was a record year for automotive sales in the United States. Sales figures for 2015 confirm the stellar turnaround experienced in the industry given that sales in 2009 dipped to 10.4 million vehicles, the lowest level since World War Two, when adjusted for population. For 2016, experts are predicting a modest increase, with an expectation that sales will peak at 17.75 million though the economic headwinds sweeping parts of the United States, and the global economy might entail a downward revision of this forecast.
The 5.7 percent sales growth over the prior year accomplished in 2015 was propelled by a number of positive economic features such as the markedly improving jobs picture (5 percent unemployment rate in December; 2.55 million new private sector jobs in 2015; 292,000 new jobs in December and an average of 284,000 new jobs in the last three months of the year; 70 consecutive months of private sector job growth by December 2015, the longest sustained streak of private sector job growth on record); plummeting gasoline prices (in early January, prices at the pump had declined to $1.99 per gallon nationally on average, a decline of about 9.5 percent from a year ago); affordable interest rates (hovering around 3 percent for new cars); and pent-up consumer demand among the driving public for new vehicles (the average age of cars currently driven by American drivers is more than 11 years).
Importantly, consumers continued a long-running trend and shift away from purchasing cars, including sedans and hatchbacks, in choosing SUVs, crossovers and trucks. Sales of Ford’s
F-Series pick-up truck (manufactured at Ford’s plant in Kansas City, Missouri) increased by 15 percent in December 2015, a development that enabled the F-Series’ F-150 truck to extend its streak as the best-selling truck in the country for 39 years and for 34 years as the best-selling vehicle of any kind.
While in earlier decades these larger vehicles were uniformly fuel inefficient, in recent years, particularly in the aftermath of the Great Recession, vehicle manufacturers focused intensely on improving fuel efficiency standards with regard to SUVs, crossovers and trucks. As a result, most of these vehicles demonstrated improved miles-per-gallon compared to prior years. Specifically, one of the conditions of the bailout assistance provided to the automakers was that they ensure improved fuel economy in vehicles that would be produced in the coming decades. In fact, Devin Lindsay, an analyst with IHS Automotive, the Colorado-based company that analyzes automotive industry information, noted that setting the CAFE (Corporate Average Fuel Economy), or fuel standards, at 54.5 miles a gallon by 2025 during the bailout discussions pushed American automakers to plan ahead.
In drilling down further in terms of the specifics related to the industry’s performance in 2015, the following trends may be gleaned:
- While sales in December 2015 were below forecasted levels, they still rose 9 percent;
- In December 2015, Fiat Chrysler logged a record 69th consecutive month of increasing sales;
- Sales for the full year signified the sixth straight year of growth for the auto industry, the longest run since World War II;
- Continuing the shift of the preference of the American consumer for SUVs enabled sales of Jaguar Land Rover to increase by 26 percent in 2015; and
- Fiat Chrysler secured the highest growth rate among all the automakers in the United States with a 7.3 percent increase in sales, exceeding the industry’s gain.
Table 2 provides a graphical representation of the percentage increase in sales in 2015 over 2014 for the major automakers operating in the country.
Table 2: U.S. Vehicle Sales Percent Gains in 2015
The record-breaking production and sales numbers at the national level also are reflected in individual state records. For instance, three major automakers in Alabama combined to produce more than 1 million vehicles in 2015. Specifically, Hyundai, Honda and Mercedes cumulatively generated 1.03 million vehicles during the year, a nearly 4 percent increase over 2014, which also was another record-breaking year for the state in terms of automotive production levels. For a state like Alabama, a relative newcomer to automotive production (Mercedes began production in the state only in 1997), producing over a million vehicles in a single year is a significant accomplishment. Table 3 provides a graphical representation of the surge in automotive production in Alabama by one of the state’s major carmakers, Honda.
Another state that has seen impressive advancements in the auto industry and contributed to the stunning turnaround of the industry in 2015 is Missouri. Since 2010, at least 64 automotive plants and parts suppliers have created or retained more than 16,200 jobs and invested a cumulative $2.26 billion to expand their facilities in Missouri. Along with the notable success of the Missouri-produced Ford F-150 truck mentioned earlier, the company’s largest production plant in the world also manufactures America’s best-selling full-size van, the Transit. In addition, General Motors’ assembly plant in Wentzville, Missouri, manufactures the GMC Canyon (Autoweek’s 2015 Best of the Best Truck) and Chevrolet Colorado (Motor Trend’s 2016 Truck of the Year). Figure 1 features the best-selling Ford Transit commercial van on the assembly line at the Ford Kansas City Assembly Plant.
Another automaker, Toyota, with a dominant presence in several SLC states, was a major contributor to the record sales in 2015. During the year, Toyota manufactured 2.04 million vehicles and 1.93 million engines in North America, a record production year for the automaker during its multi-decade production operations on the continent. Some of the landmark events during 2015 involving Toyota’s operations in the SLC states included Kentucky producing the first entirely ‘U.S.-built’ Lexus, a $360 million investment in the state to build the ES 350 model and generate 750 new jobs; Texas beginning manufacturing the all-new Tacoma in San Antonio; Alabama boosting V6 engine production and building its 4 millionth engine at the facility in Huntsville; and Mississippi manufacturing its 500,000th Corolla at its facility in Blue Springs. Moreover, Toyota’s production facilities in the SLC states also enjoyed several important anniversaries during 2015: the plant in Kentucky turned 30, while facilities in West Virginia (20 years), Alabama (15 years) and Mississippi (5 years) reached important milestones. Figure 2 features Toyota’s assembly operations at its plant in Kentucky.
In closing, the performance of the auto industry in 2015, both the Big Three and the dozen or so foreign automakers with manufacturing operations scattered across the country (but mostly domiciled in the Southern states) is to be commended. The industry’s performance is all the more impressive given the two major challenges confronted by segments of the industry in the past year: (1) the revelation that German manufacturer Volkswagen, currently operating a major manufacturing operation in Chattanooga, Tennessee, had installed “defeat devices” in about 600,000 cars in the United States designed to trick emissions tests in several of its more popular diesel-powered models; and (2) the installation of air bags from Takata, the Japanese giant auto parts supplier, that were found to explode and spray shrapnel in more than 19 million Fords, Hondas and other vehicles sold in the United States. Notwithstanding these significant setbacks, the auto industry sprang forward and sold a record number of vehicles in 2015. When the record of the industry in 2015 is assessed against its performance leading up and during the height of the Great Recession, the industry’s remarkable progress is clearly apparent. The fact that these auto manufacturers, the myriad auto parts suppliers servicing the manufacturers and the many other related operations assisting the manufacturers continue to flourish in many parts of the country, but particularly in the Southern region, remains an important testament to the resiliency of this aspect of the American economy.
* For more than a dozen years, the Southern Legislative Conference (SLC) has focused intensely on the importance of the auto industry in the Southern states. The most recent SLC publication entitled ‘The Drive to Move South Advances: Automakers Revitalize the U.S. and Southern Economies,’ released in July 2015, outlined the comeback of the auto industry in the United States from the doldrums it was thrust into during years of the Great Recession.