Auto Sales Hit New Record as Americans Buy More Gas-Guzzling Cars

Americans' appetite for trucks and SUVs drove auto sales to new heights in 2016.

Major automakers and analysts put the final tally slightly above 2015's record 17.5 million vehicles sold as stronger-than-expected December sales figures rolled in yesterday.

Amid low gas prices, Americans are continuing to choose bigger and less fuel-efficient trucks and SUVs over passenger cars. An increase in sales of the bigger vehicles of around 7 percent in 2016 over 2015 offset a decline of up to 8 percent in sales of small to medium-sized cars, according to data provider Autotrader. It was the industry's seventh straight year of gains, although analysts cautioned that growth may slow in 2017 as automakers retool production to better match consumer demand.

The increasing popularity of gas-guzzlers has contributed to a continuing rise in greenhouse gas emissions from transportation and a plateauing of overall fuel economy, even though automakers are successfully increasing the fuel efficiency of even their least fuel-efficient models every year to meet federal fuel economy standards.

The average fuel economy of new car sales has stayed at roughly 25 mpg since the fall of 2014, despite a slight peak this summer, according to the University of Michigan's Transportation Research Institute.

Gas prices have gradually increased from their record lows over the summer, but that does not appear to have dissuaded American consumers. Automakers raced to line up various incentives to get rid of extra inventory at the end of the year, bringing an unexpected bump in December sales, said analysts. Trucks accounted for 64 percent of December's volume, a monthly record, according to WardsAuto.

General Motors Co. saw a full 10 percent gain in December sales over last year, driven by Chevrolet SUVs and crossovers. Ford Motor Co. said it sold 87,512 F-Series pickups in December, a 3 percent increase, making it the best sales month in 11 years for the country's most popular truck.

A year of 'adjustment'

Ford U.S. truck sales, including vans, pickups and heavy trucks, totaled 1,077,006 vehicles in 2016, a 7 percent increase over 2015. General Motors saw an overall 2 percent increase in yearly sales.

Fiat Chrysler Automobiles reported a 10 percent decrease in December sales and no change in overall yearly sales. Ram Truck and Jeep brands still sold slightly more vehicles than in 2015, but Fiat sold less.

Electric vehicle sales also increased since last year as more automakers offered models, although they remain a sliver of the overall light-duty vehicle industry. Luxury cars like Tesla Motors' Model S largely drove the gain, although that also stumbled. This week, Tesla announced it had delivered 76,230 cars to customers, falling short of the company's forecast of 80,000 vehicles.

Automakers are already retooling production to match consumers' taste for bigger vehicles. Ford announced it would cancel a new plant in Mexico that was set to produce the Focus sedan this week amid declining sales of small to medium-sized cars. It will be building new electric and autonomous vehicles, including an all-electric SUV, in Michigan.

Analysts cautioned that they do not expect 2017 to continue the record-breaking sales trend.

“The push was just so hard in '16 that '17 is going to be a year of adjustment, when they come back and say, 'OK, we had some issues with production. We're going to move production around; we're not going to stockpile as many on the lots; we're going to build what sells; we might have consumer credit issues creeping into the industry,'” said Michael Harley, an analyst at Kelley Blue Book.

Automakers said they think otherwise. Ford CEO Mark Fields his week said he was encouraged by “pro-growth” policies promised by President-elect Donald Trump and the Republican Congress, including lowering regulations and taxes. Automakers have asked Trump to soften fuel economy rules, which they say hamper production of the cars Americans want.

Mustafa Mohatarem, GM's chief economist, said consumer confidence and other key economic indicators reflect optimism about the U.S. economy and position the industry for a strong 2017. Consumer confidence hit levels not seen in 15 years in December.

Reprinted from ClimateWire with permission from E&E News. E&E provides daily coverage of essential energy and environmental news at www.eenews.net.