Shift to Light Truck Sales Projected to Continue
Feb. 20, 2018—Morningstar Credit Ratings recently released a report indicating that it expects to see a second consecutive year of overall auto sales decline in 2018, as pent-up demand coming out of the financial crisis has largely been satisfied, an increasing number of near-new used cars comes off lease, and higher interest rates negatively impact affordability.
The morningstar.com analysis suggests that the aforementioned factors should represent a “headwind” (a situation that will make growth more difficult) for OEMs like Ford and General Motors, since both are “highly levered” to the domestic market.
And, both Ford and GM are also levered to the shift toward more profitable light trucks and away from lower-profit passenger vehicles. Both companies generated over 75 percent of their U.S. unit sales from light trucks, including crossovers, in 2017.
The investing company noted that it expects the shift to light trucks to continue, due in large part to the healthy underlying U.S. economy, reasonable fuel prices, and an increasing variety of light truck and crossover products.
Light truck industry sales increased 4.4 percent in 2017, while passenger car sales declined 11.2 percent. Light truck sales represented 65 percent of the U.S. market in 2017, up from 61 percent a year prior.