Auto and light truck sales rose a solid 12.6% in March from February. It was a 56.2% jump from March last year. Of the 17.75 million units of light vehicles sold in March, 78.2% were light trucks and 21.8% were autos. The last time the U.S. saw auto and light trucks sales at this level was in May 2004 – light vehicle sales were 17.76 million units.
Perc Pineda, PhD
Chief Economist
Auto and light truck sales rose a solid 12.6% in March from February. It was a 56.2% jump from March last year. Of the 17.75 million units of light vehicles sold in March, 78.2% were light trucks and 21.8% were autos. The last time the U.S. saw auto and light trucks sales at this level was in May 2004 – light vehicle sales were 17.76 million units.
Reasons for Upbeat Light Vehicle Sales
Three things explain the sustained demand for light vehicles. Low interest rates are attracting buyers. In addition to low borrowing costs, dealer incentives are boosting auto and light truck sales. Concerns about COVID-19 are also driving vehicle ownership, affecting rideshares and public transportation.
It has been reported that Uber rides fell 53% year-over-year in the third quarter last year. While that was an improvement over the 75% decrease in the second quarter last year, it appears demand for ridesharing has not returned to a pre-pandemic level.
Limited travel and leisure options are also driving light vehicle demand. Americans have been venturing out in their vehicles, while travel and leisure services have yet to reopen fully. Last year’s AAA analysis that Americans are making cautious and spur-of-the-moment travel plans was on point. Until more people feel safe to travel by air, Americans will hit the road for family vacations and outings, buoying light vehicle demand.
Motor Vehicle Assemblies: Leading Indicator
Robust light-vehicle sales in March are good news for plastics companies serving the transportation end-market. However, the light-vehicle sales metric could be a lagging indicator. A leading indicator plastics companies should keep an eye on is motor vehicle assemblies.[i]
Following a V-shape recovery last year, motor vehicle assemblies have been decreasing since July 2020 due to supply-chain bottlenecks. Of approximately 30,000 auto parts, a third are made from plastics. Lower resin supplies for auto-parts manufacturing and an ongoing shortage of semiconductor chips are good examples.
Increasing light vehicle sales alongside decreasing assemblies, as shown in the below chart, means falling inventories. Ford Motor Company’s inventory was 6.5% lower on April 1st compared to March 1st, according to Automotive News. Motor vehicle assemblies must rise to maintain optimal inventory levels to supply strong light vehicle demand. PLASTICS expects resin production to increase 4.0% this year.
2021 Outlook
Can plastics companies count on a growing transportation end-market through 2021? The answer is yes – the outlook remains bright. After a 14.9% decrease in auto and light trucks last year, PLASTICS expect a 15.0% increase this year. The automotive industry thrives on innovation, and plastic materials play a critical role.[ii] Auto and light truck buyers pay close attention to new model releases. Pent-up demand will sustain sales this year. Increasing auto and light truck demand drives employment. As the U.S. labor market continues to improve, expect employment to rise with auto demand.
Ten-year Treasury rates have been increasing lately—a sign of economic recovery—and long-term rates will increase too, including car loan rates. But car buyers have competitive financing options including car-manufacturer financing. If car loan rates increase this year—as demand for money increases with economic expansion—it is unlikely rates will rise at cost-prohibitive levels for consumers. A parts shortage will likely be resolved, and higher transaction prices will diminish.
[i] PLASTICS members can access monthly transportation end-market data at https://www.plasticsindustry.org/data-analysis-reports/.
[ii] The Transportation & Industrial Plastics (TIP) Committee is PLASTICS’ point of engagement for all producers of rigid and durable plastics used in automotive, industrial and consumer goods. For more information visit https://plasticsindustry.org/who-we-serve/processors/transportation-industrial-plastics-committee/.
