Morningstar

November Shift to Light Trucks Good News for Detroit

Fleet sales boost Ford's numbers but nick GM's results.

Securities In This Article
Ford Motor Co
(F)
General Motors Co
(GM)

November U.S. light-vehicle sales came in at good levels as Americans continue to move away from sedans and into light-truck models. This mix shift is especially good news for the Detroit Three--each has a U.S. light-truck mix of over 70%.

Both Novembers had 25 selling days. November sales, excluding Nissan which had a technical problem, rose 1.1% year over year. GM estimated the seasonally adjusted annualized selling rate, SAAR, at 17.4 million compared with 17.83 million in November 2016.

November consumer confidence hit a 17-year high, interest rates remain low, product is more high-tech than ever, and the fleet remains old at over 11.5 years, so we see no reason to be fearful about 2018 demand. However, we continue to believe that U.S. light-vehicle sales peaked for this cycle in 2016 at 17.54 million.

Off-lease volume for this year will likely be about 3.6 million vehicles. We’ve seen recent forecasts for 2018 of 3.9 million and a peak of about 4.3 million in 2020. This extra supply in our view will only drive down used vehicle prices further and take more consumers out of the new vehicle market next year in favor of used. Leasing appears to also have a reached a peak for this cycle and was already quite high at about 30% of new vehicle sales, so we think contraction year over year is more likely than growth.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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