How important are seasonal trends in the automotive sector?

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The automotive industry has some definite seasonal trends, with peak demand occurring in the spring and fall, and lowest sales in December, January and February.

Auto Industry

The auto industry is an important element of the entire U.S. economy. The automobile sales level is often seen as a prime indicator of overall consumer spending. As of 2015, advertising by auto manufacturers is the top source of ad revenues for the television industry.

The biggest changes in the automotive industry over the past several decades have resulted from two trends. The first is the success of Japanese automakers Toyota, Honda and Nissan (originally Datsun) in making huge inroads into the U.S. auto market. As of 2015, Toyota is the third-largest automaker for the U.S. market by market share behind General Motors and Ford. Part of Japanese automakers’ success is due to the second major trend in the auto industry, primarily the result of mandates from government regulations to manufacture more fuel-efficient automobiles. Japanese automakers benefited from this trend, because their cars already offered much better gas mileage than those of U.S. automakers dating back to the 1970s, when Japanese cars first began to become popular in the United States.

New and Used Cars

The two divisions of auto sales – new and used cars – both tend to experience the same seasonal ups and downs in sales volume. Auto sales traditionally drop to their lowest levels of the year from December through February. The holiday season, when consumers make large expenditures of disposable income elsewhere, and cold weather contribute to this traditionally slow time of year for auto sales. This seasonal trend continues to hold true despite the fact that auto dealers often offer some of the best deals of the year during the winter in an effort to move inventory off their lots. Days sales of inventory is an important analytical metric for auto dealers, who generally do not like to see numbers above 60 on their DSI.

The only exceptions to the seasonal slump in auto sales during winter is in the market for 4×4 sport utility vehicles; these vehicles see a seasonal surge in demand during the winter.

Peak Seasons

The two peak seasons for auto sales occur during the spring, from the end of February through the end of May, and from September through November. During these periods of peak demand, cars’ average sale prices can rise by 10% to 15%. Part of the explanation for the fall seasonal upswing in auto sales is due to U.S. auto manufacturers traditionally introducing new models for the year. After peaking in November, motor vehicle sales tend to drop dramatically in December as the retail sales sector begins to experience its large holiday seasonal upsurge.



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