Taking a victory lap

When automakers announced official sales totals for 2015 in early January, share prices fell. Despite selling a record number of vehicles (earning solid profits), breaking a 15-year-old benchmark, Wall Street was expecting more.

Talk to sales executives for the manufacturers, and there’s always a big list of concerns – young people aren’t getting driver’s licenses and buying cars, car sharing is replaceing car ownership, higher interest rates could slow growth. Looking back at 2015, I see 17.5 million reasons to be optimistic (page 20).

Unlike some industries, where success has 1,000 fathers and failure is an orphan, experts seem determined to credit automotive strength to everyone but the manufacturers. Some pundits talk about low interest rates and subprime auto loans, others talk about record-low gasoline prices.

Could it be possible that sales are up because cars and trucks have gotten better, and because car companies are finding better ways of getting their messages to buyers?

Take a look at the vehicles that did well last year. Trucks outperformed cars, not a surprise in a cheap-gas environment, but look a bit deeper and you’ll see that it was the new and redesigned products that drove that growth. General Motors’ decision to stick with small pickups when Ram and Ford abandoned that market paid off. Jeep’s addition of the Renegade less-than-$20,000 SUV brought a new generation of buyers to the brand. Ford’s commercial vans, Nissan’s small crossovers – the products that companies designed at the worst of the economic downturn – broke the sales record, not economic conditions.

Economists expect 2016 to break last year’s record. The pace of auto sales accelerated in the final months of 2015, creating much of that optimism.

Maybe there are some Millennials living in Brooklyn, trying to grow the most epic beards possible, who have turned away from car ownership. Ignore the stereotypes and look at sales figures, and you’ll see that those car-avoiding Millennials are responsible for a bigger share of the market than the older, more affluent members of Gen X.

Data from J.D. Power shows that Millennials bought about 500,000 more vehicles in 2015 than in 2014, making them the fastest-growing demographic in the industry with a 14.3% increase. Baby Boomer sales were flat, while Gen X posted a 6.1% gain. At their current growth rates, Millennials could displace Baby Boomers as the top auto buyers by 2017.

And concerns about interest rates didn’t seem to dampen automotive buying enthusiasm or end discount financing rates in December.

Certainly the motor vehicles industry faces challenges. Car sales were poor last year, and there’s little promise of a big rebound if fuel prices stay low, but higher gasoline prices could depress booming truck and SUV sales. Companies should pay attention to trends that could threaten their futures.

But we did just pass an industry milestone and are on pace to break that record. The manufacturers, suppliers, technology providers, and service companies that make that happen should take a moment to celebrate as we get down to the business of making 2016 as prosperous as it can be.