What Are Auto Sales?
In finance, commentators use the term "auto sales" to refer to the number of cars sold in the United States. Occasionally, the term will also be used to refer to the sale of light trucks.
Automobile manufacturers report their sales at the beginning of each month, which the U.S. Department of Commerce then reports on an annualized basis. Both sets of numbers are closely watched by market participants, as auto sales are seen as an important indicator of economic strength.
- “Auto Sales” refers to the number of cars and light trucks sold in the U.S.
- This statistic is closely watched by economists and investors, since the automotive industry is a significant component of the U.S. economy.
- While auto sales declined dramatically following the 2008 financial crisis, they have since recovered and surpassed their pre-crisis levels.
Understanding Auto Sales
The automotive industry is an important part of the U.S. economy, representing about 3 to 3.5% of U.S. Gross Domestic Product (GDP). This consists not just of vehicle manufacturers, but also dealerships, parts suppliers, and related businesses. Given its size, it is not surprising that auto sales data is closely monitored by investors. Indeed, the U.S. Commerce’s Department’s monthly report on auto sales is one of the drivers used in the government's quarterly updates to GDP.
The American automobile industry has long been dominated by the "big three" of General Motors, Ford, and Fiat Chrysler; although in recent years Elon Musk has helped build Tesla into a new and widely followed player in the market.
Japanese car manufacturers are also formidable competitors, having made deep inroads into the U.S. market following the 1973 oil embargo by the Organization of the Petroleum Exporting Countries (OPEC). This embargo caused oil prices to jump from $3 to $12 per barrel, increasing consumer demand for smaller and more energy-efficient cars made by Toyota, Honda, and Nissan.
In 1982, Honda became the first Japanese manufacturer to open a production plant in the U.S. Toyota and Nissan soon followed, and by 2014, 70% of Japanese companies’ vehicles sold in the U.S. were built at these plants.
Another major milestone in the history of the U.S. auto industry occurred in the fall of 2008, following the sudden collapse of the financial firm Lehman Brothers. This event caused shockwaves throughout the financial markets and led to a credit crunch. In the midst of this crisis, it became clear that General Motors and Chrysler were both on the verge of bankruptcy, while Ford was struggling to maintain its solvency.
Although Ford managed to survive on its own, the government was forced to bail out General Motors and Chrysler using taxpayer funds of almost $80 billion. In Jan. 2014, Chrysler was purchased by the Italian firm, Fiat Automobiles.
Real World Example of Auto Sales
The economic turmoil that followed the collapse of Lehman Brothers was reflected in the auto sales statistics from that time. Between 2007 and 2009, U.S. annual auto sales plunged from 16.08 million in 2007 to 10.4 million in 2009, the lowest annual figure in 30 years.
Since then, auto sales have gradually returned to their pre-crisis levels, surpassing 17.2 million in 2018.