The US auto industry set a sales record in 2015, as the largest automakers finished the year on a high note and pushed the full-year sales tally above the 17.4 million units sold mark set in 2000. 17.5 million light-vehicle sales were made in the US in 2015, which represents an increase of nearly 6% from 2014. December’s unit sales growth rate of 8.9% was one of the highest marks of any month during the year.
December was a strong month for each of the major automakers in our coverage universe, as the lowest unit sales growth rate among the group was the 5.7% growth reported by General Motors (GM). Fiat Chrysler (FCAU) reported the highest growth in the month of December, followed by Toyota (TM), Honda (HMC), and Ford (F).
Trucks, SUVs, and crossovers were the leaders in vehicles sold, as gasoline prices remain suppressed and consumers feel less pressure to purchase smaller, more fuel efficient vehicles. The category saw unit sales jump 19% in December from the year-ago period and 13% in full-year 2015 from 2014. Car sales fell nearly 4% in the month of December and by more than 2% in the full-year 2015 from the comparable periods in 2014.
Looking ahead to 2016, we could witness another record setting year for the auto industry. Gains in employment and the corresponding growth in personal income are the most important drivers to a strong auto market, though falling energy resource pricing will provide a nice tailwind for the industry as well. Pent-up demand remains prevalent in the industry as well, though we note the industry’s inventory-to-sales ratio is at its highest point since August 2008. This could lead to some discounting across the entire industry in 2016, which could impact bottom line growth for automakers, even if sales expansion remains robust during the year.
Before we dive deeper into their performances in the month of December and 2015 as a whole, let’s take a look at the prices of major automakers in our coverage universe as they compare to our fair value estimates in the chart below. To access our valuation and dividend analysis for each company below, please visit their respective reports on their landing pages.
Ford Remains Overall Best-Selling Brand in the US
Ford has been America’s best-selling brand for 6 straight years in terms of total sales, powered by the F-Series being the best-selling vehicle in the US for 34 straight years and the best-selling pickup truck for 39 consecutive years. Total US vehicle sales grew 5.3% to more than 2.6 million in 2015 for the company as a whole. In the month of December, the firm advanced total vehicle sales by 8.4% to 239,242, driven by material growth in sales of the F-Series and Ford brand SUVs.
F-Series annual sales advanced 3.5% despite a weak first half due to the revamping of its production. In the month of December, sales of the F-Series jumped 14.6% to more than 85,000, which marks the first time in a decade the line has broken the 85,000 vehicles sold threshold. Meanwhile, Ford brand SUVs had their best December since 2003, as unit sales jumped 13.6%, led by the newly redesigned Explorer and Escape and the all-new Edge. Segment unit sales grew 7.8% for the full-year period.
Ford brand vans set an annual sales record with 220,586 vans sold in the year, an increase of 32% from 2014. The Fusion was the lone bright spot in the month of December for Ford brand cars, while the Mustang was the only Ford car to report material sales growth for the full-year 2015.
The company’s Lincoln brand performed well in the month of December and 2015 as a whole thanks to high demand for its luxury SUVs. With unit sales growth of 12.1%, the brand had its best month of December since 2006, and its best annual volume since 2008 on the back of more than 7% unit sales expansion. The all-new Lincoln MKX advanced unit sales by more than 77% in the month, while the MKC nearly doubled unit sales on the year. Lincoln continues to grow its presence as a luxury vehicle brand.
Image source: Ford monthly sales report
Though Ford car sales continued to languish in the month of December, the company as a whole continued to perform extremely well. The newly redesigned F-Series appears to be unstoppable now that it has been at full production and inventory for a number of months. The F-Series is also better equipped to handle a potential rebound in crude oil prices compared to its competitors, as it is one of the most fuel-efficient full-size models on the market.
China may be a point of interest for Ford moving forward, as slowing economic growth will more than likely impact auto sales growth. GM continues to execute well in the country, and as the country’s middle class continues to expand, we’re expecting competition to heat up. Ford finished 2015 with astounding 27% unit sales growth in the month of December, raising its full year unit sales growth to 3%, which was in line with the growth of the overall China auto market. Regardless of what takes place overseas, we expect the F-Series and Ford’s new and redesigned SUVs to be the drivers of its sales growth for the foreseeable future.
GM, Chevrolet Continue to Grow Retail Share
Retail sales growth outpaced total unit sales growth at GM in 2015, as retail sales advanced 8% in the month of December and the full year while total unit sales increased 5% for the full year from 2014; unit sales totaled 3.1 million for the full year. GM’s retail deliveries have increased every month since March 2015, and its 2015 US retail market share expanded 40 basis points from the prior year.
The Chevrolet brand advanced its market share by 40 basis points as well, which represents the largest increase of any full-line brand, while the GMC brand also increased its retail market share by 20 basis points. These retail market share gains are even more impressive when considering the fact that they took place during a record year for the industry as a whole. The company also grew its Commercial business by 12% in the year.
The strength in retail market share was driven by GMC and Chevrolet trucks, of which 1.2 million units were sold in 2015, including 939,198 pickup trucks. GM’s retail share of the full-size pickup market advanced by more than 1 percentage point to 39.2% as the Chevrolet Silverado and GMC Sierra both had strong years, while the firm’s market share in the mid-size pickup segment jumped to 32.5% from less than 5% in 2014 thanks to the 2014 launch of the Chevrolet Colorado and the GMC Canyon.
The GMC brand continued its strong year in the month of December, with total unit sales growth of 13% in the month and 11.3% unit sales growth for the full year from the year-ago periods. GMC saw solid growth in all of its vehicles aside from the Savana. The Cadillac brand’s strong December helped it buoy full year results in the low-single digits. The brand’s full-year total unit sales growth was driven by strong performance from two Escalade models and the SRX.
Though the Chevrolet brand did not grow its total sales at the same rate as its retail sales, it still grew total unit sales by 4.5% in 2015 to 2.1 million units. The aforementioned pickup trucks were main drivers, and the performance of Chevy SUVs such as the Traverse, Equinox, and Trax helped boost results. The weakest brand for GM was Buick, which saw a minimal increase in unit sales of 1.7% in the month of December from the year-ago period. The Buick brand was weighed down by material declines in its lineup of mid-size cars.
Image source: GM monthly sales report
Though we are not anticipating a material recovery in crude oil prices in the near term, GM may be the most sensitive to a potential increase in the price of the black liquid. The strength in its truck and SUV lineups has been a key driver of its performance in 2015, and its car offerings are not as robust as some of its competitors. The future of fuel efficient vehicles at GM may rely on crossover SUVs and the growth of its mid-size truck offerings as they relate to full-size competitors.
The firm had a strong year in China as well, reporting more than 5% growth in a year in which the country realized its slowest economic growth in 25 years. China, the world’s largest auto market, is expected to have grown vehicle sales by 3% in 2015, showing the strength of GM in the country’s auto market. GM’s 3.61 million vehicles sold in China in 2015 was more than three times the amount sold by its major rival Ford. At the moment, shares of GM appear to be undervalued, based on our fair value range of $32-$59 and is trading at an attractive relative valuation, but its technical indicators are not favorable.
Toyota and Lexus Brands Report Best-Ever December Sales
The Toyota and Lexus brands reported their best-ever unit sales in the month of December, as Toyota Motor Sales sold 238,350 vehicles in the US in the month, an increase of 10.8% from December 2014. For the full-year 2015, the firm reported unit sales of nearly 2.5 million, an increase of 5.3% from 2014.
The strength in the month of December was backed by December unit sales records from the firm’s light truck division, the Toyota RAV4, and the Toyota Highlander. Also, the Lexus NX and LX, both of which are luxury SUVs, grew unit sales by nearly 80%. In the full-year 2015, Lexus luxury SUV sales grew by 26.5% from 2014, while Toyota SUV and pickup truck unit sales advanced 10.5% and 9.1%, respectively, on the year. The mid-size pickup Toyota Tacoma had a strong year, reporting unit sales growth of 15.8% from 2014.
The RAV4 and Highlander also set annual unit sales records, as did the Toyota Corolla, which is Toyota’s second best-selling car to the Camry. The Camry retained its crown as the best-selling passenger car in America for the 14th consecutive year, despite unit sales remaining nearly flat in 2015. The Corolla posted a solid 7% growth rate in unit sales in 2015, but the rest of Toyota and Lexus cars struggled on the year as the company’s unit sales as a whole fell by 0.5%.
Image source: Toyota monthly sales report
Toyota car sales continue to suffer from suppressed crude oil prices, and its mid-size pickup and diverse SUV offerings may be more resilient than some of its competitors. Lexus had a strong 2015, and the pent-up demand from the Great Recession has given luxury brands like Lexus and Lincoln a shot in the arm. We would expect this to continue should gains in employment and personal income continue. At the moment we feel shares of Toyota are undervalued based on our fair value range of $121-$223, but the firm’s relative valuation and technical indicators could use some improvement.
Honda Sets All-Time Annual Sales Record
Honda Motor Company reported and all-time annual sales record of ~1.6 million vehicles sold in 2015, a 3% increase from 2014. The firm also set an all-time sales record for the month of December with unit sales growing nearly 10% from December 2014 to 150,893vehicles. The company’s trucks segment set its annual unit sales record with 9.7% growth, and the Honda division recorded its best year ever, as unit sales advanced 2.6% from 2014.
Honda SUVs and Acura cars were the main drivers of growth in the company’s record setting year. Honda truck and SUV unit sales increased 11.7% in 2015, while Acura SUV sales fell by 1.2%. The Honda CR-V maintained its leading position in the SUV market with its fourth straight annual sales record, as the number of CR-Vs sold grew 3.2% from 2014, and the Honda Pilot advanced unit sales by more than 25% on the year.
Acura car sales jumped 18.6% in 2015, defying the gravity of the car market as a whole thanks to the mid-2014 release of the TLX, which more than doubled sales in 2015. The ILX was the only other Acura car to report an increase in sales during the year as it grew sales by 3.8% from 2014. Honda car sales continue to flounder with the rest of the industry, losing 4.2% of 2014 unit sales. The bright spot for Honda cars was the 2.9% growth in Civic sales. The firm’s best-selling car model, the Honda Accord, saw its sales fall by 8.4% in 2015.
Image source: Honda monthly sales report
Honda is extremely proud of its annual US auto sales record in 2015, but it is important to remember that the company has multiple irons in the fire. It is anticipating continued unit sales expansion in its motorcycle and power products segments in addition to the recent strength in its auto segment. Honda is not dependent on pickup truck sales for growth as some of its domestic competitors are, so it may very well be more resilient should crude oil prices rebound. Also worth noting is the fact that the company set an annual sales record in a year in which its best-selling model’s unit sales dropped 8.4%. We would expect this to rebound during the next revamp of the model, as was the case with Honda SUVs. Honda is off to a great start in fiscal 2016, and this strength goes well beyond its US auto sales record.
Fiat Chrysler Reports Best December in 90 Years
Fiat Chrysler increased unit sales 13% in the month of December to 217,527 units, the firm’s best month of December in 90 years. This also marks the 69th consecutive month of year-over-year sales gains. For the year, annual unit sales advanced 7%, the sixth-consecutive year of annual sales growth, and the second straight year the company has topped 2 million in sales in the US.
Eight different vehicles set sales records in the month of December for Fiat Chrysler, including five Jeep brand vehicles. The Jeep brand as a whole saw unit sales jump by 42% in the month of December. For the full year, the Jeep brand grew its unit sales by 25%, which resulted in its best annual US sales ever and its sixth-consecutive year of annual sales growth.
The Dodge brand experienced a strong month of December, as unit sales grew 6%, despite having a weak year overall. Annual unit sales fell 10% though the Dart, Challenger, and Journey all recorded their best annual US sales ever. The Ram Truck brand advanced unit sales 4%, which led to the brand’s best month of December since 1999. The brand had its best annual US sales in a decade, while Ram pickup truck sales increased 3% on the year to its best annual US sales ever. This marked the model’s sixth straight year of annual sales growth in the US.
Despite the Fiat Brand growing only 1% in the month of December, it was the brand’s best December sales performance ever. The Chrysler brand experienced a weak month of December, as sales fell 21% from the year-ago period. For the full year, sales still grew 5% thanks to strong performance from the Chrysler 200 mid-size sedan, and 2015 marked the brand’s best full-year sales since 2008.
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