Motor Vehicle Sales

What Are Motor Vehicle Sales?

Motor vehicle sales represent the number of domestically produced units of cars, SUVs, minivans, and light trucks that are sold. Automobile manufacturers report their sales either quarterly or on the first business day of every month.

Motor vehicle sales are a key economic indicator since they provide a snapshot of consumer demand for big-ticket items. As a result, motor vehicle sales figures garner an enormous amount of attention.

Understanding Motor Vehicle Sales

The automotive industry is a key component of the U.S. economy. It remains the country's largest manufacturing industry, employing millions of people and contributing roughly 3% to total gross domestic product (GDP).

The auto industry directly employs more than two million people and spends billions of dollars each year on research and development (R&D).

Autos make up a large chunk of consumer spending in the U.S. Consumers tend to purchase new autos when they are confident of their ability to afford ongoing payments and when interest rates for loans are relatively low.

An increase in motor vehicle sales can provide insight into the overall direction of the economy. When consumers are confident enough in their financial situation to purchase big-ticket items like autos, it tends to indicate that the economy is performing well. Equity markets respond favorably to positive economic growth indicators since it translates into higher corporate profits and higher stock prices.

Motor Vehicle Sales in the Great Recession

The correlation between motor vehicle sales and economic growth was evident during the Great Recession. Between Dec. 2007–2009, Light Vehicle Sales in the U.S. tanked considerably, from a seasonally adjusted annual rate to 15.718 million to 11.060 million.

In response, the federal government directly bailed out some automakers and rolled out a temporary program known as "Cash for Clunkers." The program offered tax credits in return for trading in older vehicles to purchase new vehicles to support sales demand.

Recent Trends

In the years following the Great Recession, motor vehicle sales experienced its longest growth streak since before the Great Depression. By 2016, Light Vehicle Sales had returned to an average rate of around 17 million per year, a comparable figure to pre-recession numbers. Still, they remained relatively static at that level since then.

By 2020, the Big 3 automakers represented 44% of auto sales in the U.S. However, with the start of the coronavirus pandemic in March of 2020, Ford Motor Co. (F), General Motors Co. (GM), and Fiat Chrysler Automobiles (FCAU) agreed to adopt new safety measures, which included partial shutdowns of manufacturing and assembly plants.

Ford

Auto sales and sales of trucks took a hit in 2020. For example, at the close of Q3 2020, Ford sold slightly more than 550,000 vehicles, representing a 4.9% drop in sales from the same period a year earlier. Most of the falloff in sales was due to a drop in commercial vehicles.

The sales results make sense since many businesses had to shut down for a portion of 2020 due to the coronavirus pandemic. Other companies that remained open saw less revenue and sales. These headwinds impacted the economic conditions leading to commercial companies cutting spending on big-ticket items—or capital expenditures—including vehicles.

General Motors

General Motors delivered 665,192 vehicles in the third quarter of 2020, representing a 10% decline from the same quarter a year ago. However, the company cited a few economic factors that helped drive sales despite being lower than in 2019. Low-interest rates for loans allowed customers to obtain cheaper financing and lower payments.

Also, people saw that a car or SUV, for example, represented a "safe space" for taking trips. Other households that had forgone spending money on a family vacation or other leisure activities due to the pandemic had instead shifted that money into buying a new vehicle.

2021 and Beyond

Electric vehicle (EV) sales are expected to continue to gain favor in the coming years, which could lead to rising sales for EV manufacturers like Tesla Inc. Nevertheless, the economic damage to the global economy resulting from the coronavirus pandemic may hamper sales for the auto industry in 2021.

However, even if the industry returns to pre-2020 levels, stagnant vehicle sales growth had persisted for years. This could be a worrisome sign for the industry, demonstrating a shift in consumer spending behavior. Perhaps consumers might opt for more EV vehicles in the coming years. Or perhaps, stagnant auto sales growth might be due to the latest models being more durable, eliminating the need for them to be replaced as regularly.