The nearly 15% drop in U.S. light-vehicle sales last year (according to Ward's AutoInfoBank) was the largest annual decline since the Great Recession, according to a report published today by S&P Global Ratings, titled "After Ending 2020 Strongly, U.S. Auto Sales Are Set To Continue Recovery In 2021." However, profitability in North America for most auto issuers recovered strongly in the second half of 2020.
Automakers were able to lower sales incentives as demand was bolstered by strong housing starts (which have had a strong correlation to auto sales historically), benign interest rates, low gas prices and the ongoing shift of customer preferences toward more-profitable trucks and large SUVs. Another contributing factor was the consumer shift away from public transportation and a flight to the suburbs during the pandemic. As a result, we believe the industry's prospects have improved considerably since last spring, when we took several negative rating actions following dealership closures and a two-month halt in automotive production.
