Trucks and SUVs are sustaining an incredible boom in the US auto market

By Matthew Debord

Another month of US auto sales, another chance to revisit the dominant theme in the market: pickup trucks and SUVs are driving the business to levels not seen since before the financial crisis. The car makers are reporting July US sales throughout the day Monday, and so far, the numbers are crushing expectations.

Analysts who follow the industry were predicting a 2015 sales pace of 17.3 million new vehicles at the upper end, but July's data indicates a pace of 17.6 million.

Once again, if you're selling pickup trucks and SUVs in the USA, you're raking in sales and profits (automakers generate substantially higher margins on these vehicles). General Motors sold 86,000 pickups in July. Ford saw sales of its F-150 pickup, long American's bestselling vehicle, increase by 13%, the biggest hike since 2006. Dodge/Ram and Chrysler - all part of Fiat Chrysler Automobiles - rounded out the Big Three's performance, with Ram pickups selling at a pace not seen in 10 years.



Let's put this all in useful perspective. In one month, GM sold as many pickups alone as Tesla could be selling total vehicles in an entire year by 2016-17 - if everything goes according to
Elon Musk & Co.'s plan.

Taken as a whole, July sales represent a stunning comeback for the US auto industry and for the US car market. Cheaper gas and low interest rates, along with an improved economy, are convincing buyers to take the plunge on new vehicles, and especially big trucks (compact SUVs have also been strong, which has brought Honda, Toyota, and Nissan along for the ride).

But there's another factor that keeping the US auto market in overdrive.

The average age of a vehicle on US roads is now 11.5 years. This just doesn't happen in America; it's a hangover from the Great Recession, when the US market fell below a 10-million annual pace and credit locked up, curtailing new car sales and nearly driving Chrysler and GM into the grave (widespread unemployment also contributed).

Those old cars and trucks need to be replaced. And with a total US vehicle fleet of about 260 million, it could take years to cycle through the necessary replacement levels, even at a 17-18-million sales pace (a standard annual "replacement rate" pace is 15 million).

With the third quarter underway and the US market surging to heights it hasn't seen since the mid-2000s, the big question now isn't whether 2015 will surpass 2014 in total new car sales - it's whether 2015 will see an 18-million pace in the second half, setting the stage for an even more robust 2016.