Retail sales of new light-duty trucks and vans have vaulted motor vehicle retail sales to seven consecutive years of growth, achieving historical peaks in 2015 and 2016. However, growth has slowed, and continued gains are no longer a given.
As the economic environment improved following the 2007-2009 recession, disposable personal incomes rose as the Federal Reserve held interest rates at historic lows. Sales of new motor vehicles benefitted from these trends, rising to a record high of 17.9 million units in 2016. Light trucks and vans (including crossovers) were the primary drivers of the market’s total gains, accounting for 77% of the sales volume increase.
Consumer preferences in light vehicles have shifted significantly the last several years. Thus, as recently as 2012, automobiles accounted for over half of US light vehicle retail sales. However, automobile retail volumes have since fallen, while light truck and van sales have soared to all-time highs, resulting in light trucks and vans accounting for over 60% of new light vehicle retail sales in 2016. Much of this has been supported by the popularity of new crossover vehicles.
While the economic environment is expected to continue to improve over the next several years, some indicators are not projected to move in a direction favorable to new motor vehicle sales (and light trucks and vans in particular). Fuel prices are forecast to rise over the next few years, a direction unfavorable to new light truck and van sales, though fuel prices are not expected to reach the heights of the 2011-2014 period.
In addition, as the vast majority of new vehicle sales are financed through loans or leases, interest rates can also influence sales. The Federal Reserve has begun raising interest rates in the past year and is expected to continue doing so. In addition, leases have accounted for over a quarter of new vehicle sales in recent years. As interest rates rise and leases entered into two to three years ago come to an end, new leases will come with higher monthly payments, while the price of used vehicles will remain highly competitive as record sales of the recent years will provide an ample supply.
For more insights into the US motor vehicle market, see Motor Vehicles: United States, a report recently released by the Freedoina Focus Reports division of The Freedonia Group. This report forecasts US motor vehicle retail sales in units to 2021. Total demand is segmented by product in terms of:
- light-duty trucks
- heavy-duty trucks
- medium-duty trucks
- medium- and heavy-duty buses.
Related Freedonia Focus Reports include Medium- & Heavy-Duty Trucks & Buses: United States, Motor Vehicle Leasing: United States, and Automotive Repair & Maintenance Services: United States.
About the Author
Luke Hickman is a Market Research Analyst for Freedonia Focus Reports. He holds a degree in economics, and his experience as an analyst covers multiple industries.