DEFINITION of Auto Sales
Auto sales are the number of cars sold in the United States, although some statistical reports include sales of light trucks as well. The automobile companies report their car sales at the beginning of each month, and the U.S. Department of Commerce reports overall auto and light truck sales on a seasonally adjusted annual basis later in the month. The financial markets closely watch both sets of data.
BREAKING DOWN Auto Sales
Auto sales are an important indicator of the strength of the U.S. economy. The results in the Commerce Department's monthly report are also incorporated into the government's quarterly report on the Gross Domestic Product.
Background of Auto Sales
The automobile industry is a major component of the U.S. economy. Production has long been dominated by the "big three" of General Motors, Ford and what is now known as Fiat/Chrysler. Japanese car companies began to make strong inroads in the U.S. market following the 1973 OPEC oil embargo, which pushed oil prices from $3 to $12 per barrel. The resultant increase in gas prices made the smaller and more efficient cars from Toyota, Honda and Nissan attractive in the U.S. market for the first time. In 1982, Honda became the first Japanese manufacturer to open a plant in the United States. Toyota and Nissan soon followed, and by 2014, 70% of Japanese companies' vehicles sold in the United States were built at these plants. Korean and European manufacturers have joined them.
2008 Collapse and Bailout
In the aftermath of the bankruptcy of Lehman Brothers and the stock market collapse in the fall of 2008, GM and Chrysler were both on the verge of insolvency. Car sales had been in decline since the housing market skid began the previous summer and caused a sharp slowdown in consumer spending. Credit was drying up as well. Ford had lined up sufficient lines of credit of its own in order to survive, but the federal government stepped in to bail out the other two companies, with a package that eventually totally close to $80 billion. Fiat eventually bought Chrysler, and the U.S. government effectively owned GM until December 2014.
Auto sales fell sharply from an annual rate of 16.08 million in 2007 to a 30-year low of 10.4 million in 2009. By May 2015, annual sales had rebounded to equal the all-time high of 17.3 million, set in 2000. The seasonally adjusted, annualized sales rate for May 2018 was 16.91 million cars, according to the Automotive News Data Center, down from 17.21 million in April but up from May 2017’s 16.82 million rate. May, typically one of the biggest months of the year for sales, marked the first time the SAAR fell below 17 million since August 2017, when Hurricane Harvey in Texas disrupted demand.
The automotive industry is broadly defined to include dealerships and parts suppliers, in addition to vehicle manufacturing. The industry as a whole represents an estimated 3 to 3.5% of total U.S. gross domestic product in any given year.