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James Bryant

Trucks Drive US Light-Vehicle Sales to Best May Ever

by James Bryant | Dun & Bradstreet Editor

June 5, 2015 | No Comments »

Pickup-trucks-yellow-dealer_shutterstock_581856_1100px-02Technology is changing the way we think about automobiles, and mobility in general. But for all the media coverage of electric cars and autonomous vehicles, when gasoline prices drop, a lot of US consumers still think of only one thing — trucks. SUVs and trucks propelled overall light-vehicle year-over-year sales upward 1.6% in May 2015, marking the strongest monthly sales levels in nearly ten years and the most May sales in industry history, according to Automotive News.

May’s results helped keep 2015 on pace for topping 17 million light-vehicle sales for the first time since 2001. Favorable interest rates and lease options, low gas prices, and longer loan terms are helping lure buyers to market. Increased demand for trucks and SUVs is also helping to drive average sales prices higher. Truck sales increased 6.8% in May 2015 compared to May 2014, while passenger car sales declined 3.7 percent. Year-to-date, light-truck sales are up 10 percent compared to a 1.3 percent drop in unit sales for cars. Some manufacturers have struggled to bring enough light trucks to market in order to meet rising demand.

May is traditionally a big month for light-vehicle sales as consumers drop their tax refund checks on down payments for a new vehicle in anticipation of summer road trips. But automotive analysts expected May 2015 to cool off amid lower sales to car rental firms and other fleet operators. Industry watchers also wondered how much longer US car sales can keep the winning streak going, which has been spurred for five years by pent-up demand accumulated during the recession.

History shows gas prices, loose credit, and an appetite for trucks and SUVs have sometimes been a road map to trouble for both car companies and consumers. When gas prices go up or the economy goes down, owning a truck or SUV can shift from amazing to onerous pretty quickly. Prior to the recession, carmakers tried to address their overcapacity problems by offering steep incentive discounts. This strategy sacrificed profits at the altar of market share, and — as we know — it played out terribly for the Detroit Three (okay, at least two of them).

But things are a lot different now. The recession — and, in the case of GM and Chrysler, bankruptcy — forced the Detroit Three to realign production capacity with demand. The latest boom has thrived without the need for excessive discounting. Companies are more successfully building a mix of vehicles that meet consumer demands instead of building what the factories are tooled for, then dumping them on the market at a loss.

If low gasoline prices are helping to keep the truck party going, the party may last for some time to come, according to a recent oil price forecast by Goldman Sachs. Last month the US investment bank lowered its Brent crude assumption to $60-$65 per barrel for next year through 2019 and pegged its outlook for 2020 prices at about $55 per barrel.

Industry Impact:

Light-vehicle manufacturers may devote more plant capacity to producing trucks and SUVs as lower fuel prices and more favorable lending and lease terms drive US demand for larger vehicles.

James Bryant is a writer and editor for the First Research team at Hoover’s.

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