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Shift to trucks shakes top luxury makes

The U.S. auto industry's record 2015 sales total was capped off by a December that seems strong at first glance, but a closer look reveals growing concerns.

Chief among them are a calendar quirk that pumped up December's volume and soft performances in the luxury segment, where the impact of the American consumer's shift to light trucks is magnified. That shift is threatening to undermine the leadership position of top premium brands such as BMW and Mercedes-Benz, whose strength lies in cars not light trucks.

Total December sales grew by 8.9 percent to 1,641,913 vehicles, but that figure includes some sales from the first weekend of this month because the sales books were not closed until the evening of Monday, Jan. 4.

"If you correct for that, it's not the great month that a lot of people are calling it," AutoNation CEO Mike Jackson said. The big retailer experienced that in its own stores. Its December volume rose 9 percent, but its margins were narrower and on a same-store basis its new-vehicle sales rose only 5 percent.

"December was a push month, not a pull month," Jackson said.

Nissan N.A. up 19%
Among major automakers, Nissan North America led the way last month with a 19 percent jump in sales. The outsized gain was driven by heavy fleet sales, which were 79 percent higher in December than a year ago, according to industry data.

Fiat Chrysler Automobiles, Toyota Motor Sales, Subaru and American Honda Motor Co. registered gains of 9.9 to 13 percent, while Ford Motor Co., General Motors and Hyundai-Kia saw increases of 5.7 to 8.3 percent. The Volkswagen brand, hampered by its diesel-emissions scandal, suffered a 9.1 percent drop in sales.

December's seasonally adjusted annualized selling rate came in at 17.32 million vehicles. It was the lowest level since June and followed a string of three months in which the SAAR exceeded the 18 million mark.

Still, 2015 closed with total light-vehicle sales of 17.5 million, which eclipsed the 17.4 million sold in 2000 as the highest ever.

"It's a good time to be doing what we're doing," said Dean Fitzpatrick, president of Larry H. Miller Dealerships. "Growth is going to continue to level off in 2016 but at a very healthy level."

Demand is being fueled by consumers' increasing appetite for trucks; light-truck sales rose 19 percent in December. Pickups, SUVs, crossovers, minivans and other light trucks accounted for 61.3 percent of the market, up from 56.1 percent in December 2014.

There was a corresponding move away from cars, especially sedans. Total car sales fell 3.8 percent in December.

New luxury competition
That shift is roiling the luxury segment. Since the top luxury makes depend heavily on sedans, the shift to trucks is hitting them harder than other manufacturers. The largest players rely heavily on sport sedans. In December, luxury car sales fell 11 percent, while premium crossover and SUV sales climbed 22 percent.

The fallout was most painful for the BMW brand. Its total volume fell 17 percent, caused by a 27 percent plunge in car sales. Light trucks, which make up only about a third of total BMW brand sales, rose 6.4 percent.

Lexus faces a similar challenge but is less tied to cars than BMW, getting more than half of its sales from light trucks. As a result, total Lexus sales rose 3.8 percent last month. The compact NX crossover helped boost Lexus crossover and SUV sales 6.6 percent.

Mercedes' total volume was up 2.6 percent, but only 0.6 percent when excluding the Sprinter commercial van. Its light-truck sales climbed 25 percent, excluding Sprinter, offsetting a 15 percent drop on the car side.

Thanks to its strong December, Lexus reasserted itself in the luxury sales race in 2015, finishing slightly ahead of Mercedes, excluding Sprinter, and just behind BMW, which won for the fourth time in the last five years.

The consumer shift to trucks, however, poses longer term challenges for the top luxury makes. In sport sedans, they hold a clear advantage over most competitors, but it's a different matter in crossovers.

Acura's ILX compact sedan, for example, is not really a threat to the BMW 3/4 series or Mercedes C class. But together Acura's MDX and RDX crossovers often outsell BMW's X3 and X5.

In a similar way, Volvo is a bit player in luxury cars, but its redesigned XC90 is rolling. The company sold 3,135 XC90s in December, up from 68 a year before.

"As you move into crossovers, the competition gets much tougher for the luxury players," said Jim Ursomarso, vice president of Union Park Automotive Group in Wilmington, Del.

Brands such as Jeep, GMC and Subaru also offer credible alternatives to higher-priced BMW and Mercedes crossovers, he noted.

"The X3 can easily run over $40,000 with options," Ursomarso said.

"The GMC Terrain is a very popular vehicle, and you can get it for quite a bit less than an X3."

You can reach Neal E. Boudette at [email protected].
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