December 2016 US Auto Sales: Seven Consecutive Years of Rising Auto Sales

US auto sales rose 3.1% YoY in December, taking the 2016 TIV to 17.55mil units, up 0.4% YoY. Thanks to this last increase in December, US auto sales have risen for seven consecutive years, with a CAGR of 7.7% since 2009 (when only 10.4mil units were sold).  
After seven ‘fat’ years, a contraction in 2017 seems likely. While some positives remain in place, such as strong demand for light trucks, low unemployment, and possibly stronger economic growth, our main concern for 2017 is the expected rise in interest rates. Since around 80% of cars sold in the US are financed, there is a high sensitivity - particularly at the lower end of the market - to worsening financing conditions. Therefore, despite recently improved consumer sentiment and despite the potentially pro-growth policies of the next administration, we believe that a sales decline of about 2% YoY in 2017 is likely.  
While 2016 was a rather lacklustre year, it ended with a flourish, as SAAR soared to 18.43mil units in December - the highest level achieved in 2016 - registering dsr-adjusted sales growth of 6.9% (27 selling days versus 28 last year). An important factor for this strong performance was generous deals. According to auto data provider ALG, average December incentives rose by 20% YoY to US$3,763, with all six major automakers seeing double-digit growth in incentive spending. Moreover, we believe that some buyers postponed their purchases to December following the November presidential election month.  

Performance of the Japanese Automakers
In December, Japanese assemblers’ performance was mixed, with Subaru (+12.3% YoY), Nissan (+9.7% YoY), Honda (+6.4% YoY) and Toyota (+2% YoY) recording sales increases, while Mazda (-1.8% YoY) and MMC (-6.4% YoY) posted declines.