The US auto market is about to surprise everybody

pulse

October 31, 2017 10:36 PM

Automakers will report October US sales on Wednesday and the monthly sales pace is expected to be better than last year's final record total of 17.55 million.

Automakers will report October US sales on Wednesday.
The monthly sales pace is expected to be better than last year's final record total of 17.55 million.
Profitable pickups and SUVs continue to drive the market.

This was supposed to be the year that the US auto sales boom finally ran out of gas.

After consecutive record-breaking years, with 17.5 million vehicles sold in 2015 and 17.55 million in 2016, the total in 2017 after a mid-year lag appeared as though it might dip below 17 million. A big drop to 15 million wasn't in the cards, but the sales pace fell to around 16.5 million.

Then two hurricanes in a row slammed into Texas and Florida and sent consumers back to the showrooms to replace destroyed or damaged vehicles.

But the dynamics of the market also proved more resilient than expected. Analysts surveyed by Bloomberg now expect October US sales when reported on Wednesday to show a Seasonally Adjusted Annual Rate (SAAR) of 17.6 million.

The late surge has caught everyone by surprise. Automakers have been calling the sales cycle "mature" for almost two years now, and market observers are now looking at 2017 sales that have an outside chance of besting 2016's total for a third record year.

There aren't enough months remaining for sales to collapse, so another strong year now seems nearly certain.

The industry overall is happy to see the cycle extended. What's selling are pickups and crossovers, highly profitable vehicles for the automakers. Low-profit small cars have fallen out of favor, perhaps permanently.

That might sound bad, but it's actually good. A sales downturn will arrive at some point, and if carmakers are selling vehicles with good margins, it won't matter if they sell fewer of them.

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