U.S. Light-Vehicle Sales End 2009 on Positive Note, Up 15% Y/Y

December was the best-performing month of 2009 for the U.S. light-vehicle market, with sales up 15% year-on-year (y/y) to 1.03 million vehicles. Full-year sales came in at 10.432 million vehicles, down 21% from 2008. December was the only month of true y/y sales growth in 2009, discounting the August boost from the government's "cash for clunkers" programme and the mere 35-car increase seen in November.

Results were mixed across the industry in December, with some distinct winners and losers for the month. Coming out with a significant gain was Ford, posting a 33% y/y increase to 183,701 units (down 16% to 1.677 million in the full year). The company reported that its December sales were very strong across all of its brands and all of its product categories. The results allowed Ford to claim a full-year market share increase to about 15%, the first time it has been able to accomplish this since 1995. December was also the 14th time in 15 months that the company gained share from competitors. Ford products seem to be resonating with the public, with sales of the Fusion sedan up 83% y/y in December and setting both a new December and annual sales record, tallying 180,000 vehicles. Ford's redesigned Taurus also recorded stronger sales, up 90% in the full year from the prior model.

However, despite the rise in December, Ford sales were still down for the full year. This was not the case at Hyundai-Kia, the South Korean powerhouse that is rapidly gaining share and sales in the U.S. market. For December, Hyundai Group posted a 42% y/y increase to 54,845 units (up 9% to 735,127 units for the full year). Hyundai-Kia was joined by Subaru in the positive sales club, with the latter actually posting the biggest total percentage gain for the year, at 15% to just over 216,652 units (up in the month by 33% y/y to 23,074). Jaguar-Land Rover also posted sizeable increases for the month and year, of 33% y/y for December and 65% for the full year, thanks to the arrival of the hot new XF luxury sedan.

There were losers in December as well, however. General Motors (GM) sales fell another 6% y/y to 207,538 units in the month (down 30% for the full year to 2.071 million vehicles). GM chalked the decline up to the collapse of fleet sales (down 33% for the month) and the elimination of non-core brands (Saturn, Pontiac, Hummer, and Saab). Retail sales for GM were up, however, with dealers delivering more cars in December than in the same month the prior year, while there was a gain of nearly 50% from November. "The fact that our retail market share has increased two full points from the third to fourth quarters demonstrates that we are strengthening our brands", said Susan Docherty, GM vice-president, U.S. sales. "We are delivering a healthier sales mix and earning consumer confidence through our launch vehicles such as Chevy Equinox and Camaro, Buick LaCrosse, GMC Terrain and Cadillac SRX." Chrysler sales seemed to stabilise somewhat as well, posting a modest 4% y/y decline to 86,523 units (down 36% to 931,402 units for the full year). The company posted modest retail gains for some models versus the prior year, and even bigger gains versus November, raising hope that the company may have started to stabilise its freefalling sales.

Outlook and Implications

December was a much better month for U.S. vehicle sales than most analysts had predicted. The initial forecast was for a seasonally adjusted sales rate (SAAR) of around 11 million units for the month, but the actual rate came in at nearly 11.2 million units. After September's abysmal 9.2 million SAAR result, a hangover effect from pulled-ahead sales from the "cash for clunkers" programme, monthly SAAR levels have improved in each subsequent month. Although December's sales were assisted by year-end incentive deals, automakers are hoping that the recent results are a harbinger of good news as they enter the new year. However, when making comparisons with the year-ago period, one must also consider that December 2008 marked the height of the economic recession, and was a critical time for GM and Chrysler as they narrowly avoided uncontrolled bankruptcies. During that worrying time, U.S. sales dropped to a 27-year low for December, and thus any y/y comparisons will look positive.

Nevertheless, there is more to the December sales numbers than just the appearance of positive improvements thanks to the poor year-ago performance. There are some genuine gains in the mix as well. Ford and Hyundai are both in a strong position at the moment, with both well prepared to take advantage of the healing economy to post significant improvements in 2010 sales. General Motors is also in a favourable position with regards to new products, but Ford has significant new products as well without any stigma of bankruptcy or government handouts. Hyundai has bought its way into the increasing sales arena through significant vehicle incentives to consumers, but it has also mixed that up with some slick marketing strategies (such as the Hyundai Assurance Program). Combine all this with the best products that either of these companies has ever made in terms of quality, style, and technology, and the secret behind the continued success of Ford and Hyundai becomes significantly less mysterious.

For 2010, the economic picture is expected to improve, but slowly and cautiously. IHS Global Insight has raised its forecast for light-vehicle sales this year to 11.5 million units from 11.2 million last month, thanks to the improvement in overall sales and the momentum that the December results will hopefully provide. There are still inherent risks in 2010, however, and it will not be a year of significant sales growth by any means as the economy is still very cautiously healing and employment is not expected to rise until the second half of the year. There is also a risk of a double-dip recession around the second quarter, a development that could send consumers back home and keep them out of the showrooms until the mid-year months.