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Auto Sales Ride on Soaring Demand for SUVs & Pickups in 2018

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High employment rate and cheap gasoline prices helped the U.S. auto industry conclude last year on a positive note. In fact, strong economic fundamentals, along with the rising trend for spacious vehicles, pushed the industry toward annual new vehicle sales of 17.27 million in 2018, marking a yearly rise of 0.3%. The auto industry succeeded to uphold its streak of crossing the 17-million sales mark for four years in a row.

Buyers splurged on SUVs (sports utility vehicles), crossovers and pickup trucks while passenger car sales declined, similar to 2017. Car sales contributed 32% to the total sales in 2018 while trucks and SUVs accounted for 68%.

In fact, softer global market conditions and rising interest rates couldn’t stop the industry to attain the sales figure of 17.2 million in 2017. The automakers enjoyed an uptick in 2018 and December sales despite increasing car and truck prices as well as rising rates. For 2018, both Edmunds.com and Cox Automotive projected sales of 17.3 million and 17.2 million, respectively.

Contrary to the whole year, the auto industry witnessed flat sales in December, per Ford Motor Company (F - Free Report) . For December, Edmunds.com estimated rise of 0.3% in auto sales while Cox Automotive projected a 0.6% plunge.

Company Sales Figures

A rising trend in demand for larger and spacious SUVs as well as pickup trucks while abandoning cars altered the revenue generating segments for automakers. The changing vehicle buying trend compelled companies to abandon their loss-making car models, and focus on the profitable SUVs, crossovers and trucks.

Among the auto giants, General Motors Company’s (GM - Free Report) actual 2018 sales plunged 1.6% to roughly 3 million vehicles. The company doesn’t reveal its monthly sales. Although, its vehicle sales declined 2.7% in the fourth quarter from the prior-year quarter.

Another U.S.-based automaker, Ford’s sales dropped in December and 2018 by 3.5% and 9.6%, respectively. Its December sales were majorly hampered by a 27.8% plunge in car sales. Further, similar to its counterpart, Ford announced that it will stop reporting monthly sales figure and only report quarterly sales.

Among other automakers, sales of Honda Motor Co., Ltd. (HMC - Free Report) and Toyota Motor Corporation (TM - Free Report) declined 2.2% and 0.3%, respectively, in 2018. However, Fiat Chrysler Automobiles N.V.’s (FCAU - Free Report) annual sales rose 8.5% year over year on the back of Jeep and Ram pickup brands.

Honda currently sports a Zacks Rank #1 (Strong Buy) while General Motors and Fiat Chrysler carry a Zacks Rank #2 (Buy). Toyota currently carries a Zacks Rank #3 (Hold) while Ford has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term growth rate for Honda, General Motors, Fiat Chrysler, Toyota and Ford are 2.9%, 8.5%, 2.5%, 5% and 5.3%, respectively.

What’s Ahead

Although, the industry managed to keep its winning streak alive, the same can’t be anticipated in 2019. Rising interest rates and vehicle price hikes are expected to play a major role in making any buying choice. Further, expiration of leases on more than 4 million vehicles is nearing, which will pack the market with used vehicles for sale. Per AP, Edmunds.com expects sales to plummet to 16.9 million in 2019. Regardless of a cautious market forecast, automakers are bullish about 2019, with their array of launches.

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