U.S. Dealer Stocks Portend No Significant Letup in January Sales

A slight weakening in demand in December left U.S. light-vehicle inventory heading into the new year a little higher, perhaps meaning January sales will not suffer a pull-ahead effect due to the volume boom recorded over 2015’s final four months, when the seasonally adjusted annual rate totaled 17.9 million units.

More importantly, dealers overall are well-stocked with vehicles highest in demand, another reason there might not be much of a letup, if any, in the torrid pace that marked the latter part of 2015.

Inventory ended December 2.0% above the same year-ago month, the highest gap since September, and declined 3.3% from November, which is average on a historical basis.

December inventory totaled 3.56 million units, compared with 3.49 million the year before and 3.68 million in November. Days’ supply was 61, same as like-2014, but was a decline of just three days from November’s 64, when a drop of about 10 days is normal, and another indicator that January’s sales might not be hurt by pull-ahead volume in 2015.

Initial modeling puts January’s SAAR at 17.5 million units, an improvement on December’s 17.2 million and like-2015’s 16.6 million, and a good start to a year that WardsAuto forecasts at 17.8 million, beating the record set last year of 17.4 million.

Further breaking down December’s mix, stocks of North America-built vehicles remained below year-ago for the fourth straight month, totaling 2.87 million units, 0.8% below same-month 2014 and 4.9% below November. Days’ supply totaled 63, same as year-ago and down from November’s 69.

Despite the expectations of continued record sales volumes, the lower domestic inventory will not necessarily translate into significantly higher production gains in North America over 2015.

Inventory of domestically made trucks, which are rising in demand for the most part, was up 3.4% from December 2014 to 1.69 million units. But domestically made cars, with sales tanking, ended with inventory of 1.22 million units, 5.8% below year-ago. Even with lower inventory, car production is expected to continue slowing as demand slides, especially if gasoline prices remain at 7-year lows.

On the truck side, local production will remain strong, but much of the demand is being fed by overseas plants, mostly due to CUVs. CUVs not only are the biggest segment group but also the fastest-rising sector in the industry, and will continue with hefty gains this year while sales comparisons with 2015 will look flatter among the other truck segments, including pickups.

North American plants building CUVs are running full steam to keep up with demand, but overseas sourcing is necessary to pick up the slack. Thus, inventory is in place to meet demand. Dec. 31 CUV inventory totaled 937,019 units, 16.9% above year-ago and in line with the 17.6% sales increase in 2015.

Because of CUV demand, Dec. 31 import inventory was up 14.2% from year-ago and 4.2% from November, to 687,814 units. Except for 2008, when inventories soared due to a sudden drop in demand as the economy entered a recession, it was the highest December total since 1989.

More specifically, import-truck inventory, with CUVs comprising three-fourths of the total, was up 54% from like-2014 to 310,624 units. Import truck sales were up 51% year-over-year in December and 31% in entire-2015, and December market share was 12% vs. 8% in like-2014.

Import cars, however, are faring worse than domestic versions. Sales in December were down 16.9%, and slipped 7.3% for 2015. Inventory totaled 363,548 units, down 7.3% from like-2014.

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