This Week in Car Buying: 2015 was a very good year; Luxury car crunch coming; Lexus pushes CPO; Santa Fe in Alabama
The 2015 calendar year has seen a record number of vehicles sold by automakers with a total of 17,428,356 retailed over the past 12 months. All but erasing the memories of the 2008 downturn, the record is seen as the result of the remaining pent-up demand from the recession finally being satisfied. Whether or not the market grows next year will depend on the economy and interest rates, around which there is plenty of uncertainty.
But in looking back at 2015, sales started off strong early and continued to grow through the traditional big sale periods of Memorial Day, Labor Day and the strong Black Friday/Holiday events. In fact, the second half of the year often saw the seasonally adjusted annual sales rates top the 18 million mark.
Winners and losers
Some the largest gains in sales percentage year-over-year, according to Kelley Blue Book data, were the smaller luxury marques making big gains, led by Land Rover, which saw a 37.1-percent increase in 2015. Volvo, on the strength of its successful launch of the redesigned XC90, saw an increase of 24.3 percent. Also in the luxury segment, Infiniti grew by 13.8 percent, followed by Audi at 11.1 percent, Lexus at 10.7 percent and Porsche at 10.1 percent. Among mainstream makes, Jeep climbed 24.9 percent; Mitsubishi sales grew 22.7 percent; Subaru, 13.4 percent, and GMC, 11.3 percent.
Volkswagen, embroiled in the scandal over diesel emissions, saw a decline of 4.8 percent, Dodge dropped 9.9 percent as it repositions itself as a more of a performance car division, Fiat dropped 8 percent despite the introduction of the new 2016 500X, and Smart, which was changing over its one-car lineup to a new generation, dropped 28.4 percent.
Among segments, mid-size pickup trucks had a huge 40.8 percent bump in volume thanks to the successful launch of the 2015 Chevrolet Colorado and GMC Canyon models. Luxury compact crossover SUVs also continued to be hot seeing growth of 36.8 percent to 487,077 units. BMW said that 40 percent of its sales come from its X series of crossover SUVs. Mainstream compact crossover SUVs continue to be the most popular vehicle accounting for 14.6 percent of all new vehicle sales or more than 2.4 million units. Growth was 20.6 percent year-over-year. Full-size pickups remained the second largest category with nearly 2.2 million sold, good for a 5.8 percent growth in sales.
With the increased sales in trucks and crossovers, due in part to lower gas prices, full-size cars and hybrid/alternative energy cars took a hit, declining 12.7 and 13.2 percent, respectively. There was also softness on the car side in the luxury end of the market, with high end and standard luxury cars dropping more than 14 percent each.
Luxury car crunch coming
The head of AutoNation, the largest U.S. dealer chain, believes that luxury car sales will soften during 2016 and is shifting his inventory mix to more trucks and standard SUVs. “We are entering a new chapter,” AutoNation CEO Mike Jackson told the Wall Street Journal. “Yes, sales will still be above 17 million this year, but the quality of those sales in terms of lower incentives are now a challenge.”
Much the year-end sales gains came at the expense of higher incentives, something that may not initially carry over into 2016. Jackson said that while volumes were up, profit margins were much slimmer. Still, average transaction prices also hit a peak of $34,535, according to KBB data.
Lexus ramps up CPO program
One of the factors lending some uncertainty to the 2016 market is the impact of off-lease cars coming back into the market at a time of slowing luxury car sales. Some estimates put the number in the increase of leased vehicles returning to dealers at more than 800,000. Last year, dealers sold more than 2.3 million cars through Certified Pre-Owned (CPO) programs, most of them lease returns. In order to be prepared and take advantage of low-mileage, late-model cars, Lexus has beefed up its CPO program with a stronger brand presence supported by an advertising campaign.
Previously called Lexus Certified, the new L/Certified branding features a new logo to go along with the advertising campaign touting the benefits of buying a vehicle through the program. According to Automotive News, Lexus has set a goal of selling about 120,000 CPO cars next year, a nearly 50 percent increase over last year’s total of 88,518. Lexus will launch television and on-line banner ads pushing L/Certified throughout 2016.
Santa Fe to Alabama
Hyundai announced that next summer it will be adding 2016 Santa Fe Sport production to its U.S. assembly plant in Montgomery, Ala. The crossover SUV will be built alongside the Hyundai Elantra and Sonata and will give the Korean automaker more units to sell in this growing segment. The move will also give Hyundai additional flexibility to shift production to match demand for the three products.
“We are very happy Hyundai has bene able to make this change, which will result in more great Santa Fe crossovers available to our dealers and customers,” said Dave Zuchowski, president and CEO of Hyundai Motor North America. This won’t be the first time the crossover has been U.S.-built, a previous generation Santa Fe was last assembled in Alabama in 2010.
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