In the last few years, mainstream automakers benefited from strong truck and utility vehicle sales in the US. While small car sales showcased stagnation in the country, demand for heavyweight vehicles rose in the last few quarters. It’s important to note that these heavyweight vehicles, including pickup trucks and utility vehicles, tend to yield higher margins for automakers compared to small cars.
In general, heavyweight vehicles are less fuel efficient than small vehicles. Weakness in oil prices and a recovery in the country’s housing and construction market could be two primary reasons behind the higher sales. Any sustainable recovery in oil prices could hurt US truck and utility vehicle sales going forward. It would result in lower profitability for automakers. It’s important for investors to keep a close eye on oil prices and other factors signaling lowering truck sales in the US.
Among all of the major economic indicators, the consumer confidence index is critical for the auto industry. In 3Q16, consumer confidence strengthened. It reflects consumers’ optimism about the economy. A higher consumer confidence index is a positive sign for US vehicle sales. An increase in consumer confidence is one of the possible reasons for the uptrend in auto sales. Therefore, auto investors can track consumer confidence data for the coming months. Any weakness in auto sales should also need to be confirmed by weak consumer sentiments.
