We already know that the first half of 2016 has been a mixed bag for U.S. automakers with total car sales in the first seven months reaching 4.253 million, a decline of 7.7% compared to last year, and light-duty truck sales increasing by 9.1% to reach 5.913 million.
General Motors has sold 1.706 million cars, a 4% drop compared to last year while Ford saw its sales grow by 3.3% to reach 1.560 million. Ford’s jump in sales can be directly attributed to the company’s above-average performance in the light truck segment. Overall passenger car sales has been slow, with several leading car makers – General Motors, Ford, Chrysler, Toyota and Hyundai – showing negative growth this year. Honda and Nissan seem to be the only exceptions in the list of companies that sold more than 300,000 cars in the first seven months of the year.
Auto stocks have been hammered since late last year. What we call the “peak auto sales theory” took hold of market sentiment. There is some element of truth to that argument because U.S. auto sales remained above the 16 million to 17 million range since 2015. The chart below shows that number is close to the occasional above 20 million sales that the auto market witnessed in the last few decades. Looking at the historical numbers it’s easy to say that U.S. auto sales have largely stayed above 15 million car sales per month during good times and dropped below 10 million during recessions.
With auto sales now nearing the above-average range – 15 million plus – many analysts concluded that there was only one way to go from here, which was down. In a way they have been vindicated as auto stocks remain highly depressed and both General Motors and Ford’s car sales are down in the first seven months of the year – and there is a good possibility that the decline might continue for the rest of the year.
