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Auto sales were strong in October as buyers grabbed fully loaded pickups, SUVs

Russ Mitchell, Los Angeles Times on

Published in Automotive News

SAN FRANCISCO -- October was a good month for auto sales, driven by general economic growth and continued vehicle replacement in the wake of hurricanes in Houston and South Florida.

Sales are expected to slightly top the 1.37 million cars sold in October 2016 once all automakers release the month's results.

Of those that have reported sales figures, General Motors unit sales were down 2.2 percent, and Fiat-Chrysler saw a 13.2 percent drop. But Toyota was up 2.2 percent, Ford was up 6.4 percent, Nissan was up 10.2 percent and Volkswagen was up 11.9 percent.

"Overall conditions remain very, very strong," said Alec Gutierrez, senior analyst for Kelley Blue Book. "Consumer confidence continues to rise. Unemployment is down (to around) 4 percent. There's $2.40-a-gallon gas" on average around the nation.

Still, overall passenger vehicle sales are expected to decline for the full year, after seven straight years of uninterrupted growth.

While the economy is strong, wage growth is not, and that's putting a lid on motor-vehicle sales.

"There's an affordability issue," said Michelle Krebs, executive analyst at Autotrader. "Wages have not kept pace with the price of cars or with the price of everything else," she said.

The average passenger vehicle sales price, about $35,000, is higher than ever, as fully loaded pickup trucks and SUVs continue to sell well among those with good jobs and high salaries. That high average price also boosts carmaker profits.

But major segments of the population are unable to afford new cars. That has always been true for people at the lower end of the income curve, but now it appears to be affecting an entire generation and raising questions about long-term industry growth.

"Millennials have been slow getting into the new-car market," Krebs said. "They're behind on everything, in terms of gaining wealth and such."

Compounding the issue for carmakers is that "there are plenty of cars to go around," Gutierrez said. More cars are coming off lease, while quality and durability have improved, meaning plenty of desirable used and near-new cars are available.

Wage growth is hardly the only factor going forward. The auto industry is on the edge of radical change as computers begin to take over driving duties from humans and many millennials show a preference for ride-sharing and car-sharing over car ownership.

Krebs noted that even if auto sales are down somewhat this year, "it shouldn't be lost that this is still a pretty strong market." Analysts expect between 16.9 million and 17.2 million vehicles will be sold in the U.S. this year, down from 17.6 million in 2016.

"If we do hit 17 million this year, it will be only the fifth time that's ever happened," Krebs said.

October sales continued what has become a steady move away from sedans and toward pickups and SUVs. One of the fastest-growing segments is compact or crossover sport utility vehicles, or CUVs, such as the Toyota RAV4 and Ford Escape. CUVs now hold 18 percent of passenger vehicle sales, the largest single segment of the market.

According to Kelley Blue Book, sport utilities in all size categories represent about 35 percent of the market, up from 23 percent in 2007.

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