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 viewed as a key economic indicator. They provide an early snapshot of consumer demand, because they represent big ticket consumer purchases, so a lot of attention is paid to these figures.

Key Takeaways

  • 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.
  • The automotive industry is a key component of the U.S. economy, providing millions of jobs and representing a large chunk of total consumer spending.

Understanding Motor Vehicle Sales

The automotive industry is a key component of the U.S. economy. It remains the largest manufacturing industry in the country, 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).

The "big three" of General Motors, Ford, and Fiat Chrysler continue to dominate the American automobile industry, although a shift away from traditional combustion engines has paved the way for disruptors like Tesla to steal some market share.

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, both of which are widely considered positive indicators of growth in the economy. That means that motor vehicle sales can provide an important insight into the overall direction of the economy. When people are confident enough to pay out bigger sums on discretionary items like autos, it tends to indicate that the economy is flourishing. Equity markets respond to strong economic growth indicators because they should translate into higher profits and thus 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 auto makers and rolled out a temporary program known as "Cash for Clunkers" which promised tax credits in return for trading older vehicles in to purchase new vehicles in order to support sales demand.

Recent Trends

In the subsequent recovery, motor vehicle sales experienced its longest growth streak since before the Great Depression. From 2009 to 2016, Americans opened up their wallets, snapping up bigger, more sophisticated autos with aplomb. By 2016, Light Vehicle Sales had returned to an average rate of around 17 million per year, a comparable figure to pre-recession numbers, but has remained relatively static at that level since then.

The latest generation of vehicles appear to have caused some issues in the auto industry, though. The latest models have proven to be more durable, eliminating the need for them to be replaced as regularly. This observation might suggest that our reading of motor vehicle sales data should be revised. Rather than consumers earning less income, lacking confidence, and being forced to rein in on discretionary expenditures, it could just be that stagnant vehicle sales are a symptom of today's autos lasting longer.