Auto sales beat expectations for 2018, but 2019 doesn't look as good

Fiat Chrysler Automobiles NV sold more than 2.2 million vehicles in 2018, a 9 percent increase over a year ago. Ford Motor Co. and General Motors Co. both saw single-digit sales declines in 2018, the automakers reported.

Automakers beat U.S. sales expectations in 2018 thanks to tax breaks, eager buyers and strong fleet sales, but experts and analysts expect 2019 won't bring such favorable results.

Rising interest rates and vehicle prices could create more headwinds for Detroit's Big Three, specifically, as the automakers move to reinvent their business models as well as their product lineups to better situate themselves for the next generation of the auto industry.

Fiat Chrysler Automobiles NV reported Thursday the best sales increase of all the Detroit carmakers. It reported Thursday that it moved more than 2.2 million vehicles last year, a 9 percent increase over the prior year, though that was still fewer total vehicles than Ford Motor Co. or General Motors Co. 

Ford and GM both saw single-digit sales declines. GM sold 2,954,037 vehicles in 2018, down 1.6 percent from 2017. Ford sales slid 3.5 percent in 2018, with 2.5 million vehicles sold.

Overall U.S. vehicle sales totaled 17.3 million in 2018, a 0.4 percent increase from the 17.1 million sold in 2017.  The year 2017 was the first since 2009 that new vehicle sales declined. 

"The picture doesn't look quite as rosy for 2019," said Jessica Caldwell, analyst with California-based Edmunds. "While the economy is still relatively strong, rising interest rates and vehicle prices could force many buyers into the used market, or even price them out of buying a vehicle completely. If the economy weakens or tariffs push prices even higher, things could go south for the auto industry very quickly."

That's leading some on Wall Street to ring alarm bells. Adam Jonas, equity analyst with Morgan Stanley, on Thursday said in a note that 2019 will mark the first global auto sales decline since 2009. He reiterated a cautious view on U.S. auto stocks.

"In addition to lack of volume growth, we believe earnings are at risk from higher input costs, rising rates, rising (research and development) expense, and tariff-related frictional costs," Jonas wrote.

Meantime, GM, Ford and Fiat Chrysler will have to contend with U.S. buyers' continued exodus from the sedan market, according to Karl Brauer, analyst with Cox Automotive.

"Everything from tariffs to material costs to the ongoing shift from cars to trucks will drive transaction prices higher," Brauer said. "Low gas prices continue to drive people away from cars and into trucks and SUVs."

The automakers are preparing for sedan sales to shrink further — and at least temporarily skew sales numbers. Ford sales chief Mark LaNeve said Thursday the automaker anticipates the all-new Ranger midsize pickup will offset some of the sedan sales slip. But the automaker also announced Thursday it would report its sales figures quarterly rather than monthly, as it expects some volatility as it moves to prune its sedan models from the vehicle lineup.

Fiat Chrysler sales rose on the back of Jeep and Ram sales, which were up 17 percent and 7 percent for the year, respectively. The Chrysler brand slid 12 percent, while the Fiat brand was down 41 percent in the U.S. last year. Fiat Chrysler's new Alfa Romeo Stelvio SUV drove Alfa sales up 98 percent last year.

GM, which began in 2018 reporting quarterly sales, sold its 200,000th electrified vehicle in the fourth quarter, reaching the cap for a $7,500 federal tax incentive intended to encourage electric-vehicle sales.

All four of GM's brands slipped in 2018, with Buick down 5.6 percent and Cadillac down 1.1 percent for the year. Chevrolet was down 1.4 percent as sedan sales for the brand continue to steadily decrease. Truck brand GMC fared the best, down only 0.8 percent for the year, as sales of the Terrain SUV, Sierra full-size pickup and Canyon midsize pickup all posted gains.

Meanwhile, Ford's sedan sales dove 18.4 percent last year. The automaker announced early in 2018 that it planned to cut all car models out of its lineup over the next few years. Ford plans to replace those sedans with consumer-favorite crossovers, a segment in which Ford is weak.

The automaker reported F-Series pickup sales increased 1.4 percent last year. Transit van sales were up 8.2 percent. Only the Fiesta, GT, Expedition, Police Interceptor Utility and Navigator had sales increases in 2018. The automaker sold 54,348 EcoSport compact SUVs, which hit the U.S. market for the first time early last year. Ford's Lincoln brand sales were down 6.8 percent in 2018.

Toyota Motor North America reported sales in 2018 were down 0.3 percent due largely to an 11.9 percent slide in passenger car sales from both the Toyota and Lexus divisions. Toyota's truck and SUV sales were up double-digits for the year.

"Retail demand has actually been stronger in the second half of the year, though down from last year," Jonathan Smoke, Cox Automotive's chief economist said. “We think that’s a result of low unemployment and tax reform leaving consumers confident and flush with cash."

He said that extra cash — combined with lower gas prices, stabilization of interest rates and credit availability for subprime borrowers — made for more ideal buying environment than initially expected.

Twitter: @Ian_Thibodeau