U.S. auto sales remained mostly unscathed by a bitter winter blizzard to post their best January numbers in more than 15 years. Low fuel prices combined with other factors led to encouraging figures even as valuable days were lost to the storm. Most of these factors, such as a strong labor market, will continue to support the sector going forward. 

At this point, the sector still seems to be on track for a strong year. This is why it may a good idea to pick select stocks from this sector for your portfolio.

Subdued Jonas Effect

Sales seemed to be mostly unhindered by a historic snowstorm which affected most of the East Coast. This led to the loss of crucial selling days for auto dealers. Per Autodata Corp.’s estimates, sales were mostly flat compared to last month, declining by 1% to 1.15 million.

However, the annualized selling pace came in at 17.58 million compared with December’s figure of 17.34 million. Several major automakers experienced higher-than-expected sales or lost less than the projection. For instance, sales of Ford Motor Co. (F – Analyst Report) declined by 2.8% compared to the forecast of a 3.2% fall.  Fiat Chrysler Automobiles N.V. increased by 7% against an expected decline of 0.1%.

Factors Driving Growth

Record low costs of gasoline are the primarily driver of automobile sales growth. On Jan 25, the American Automobile Association (AAA) said that prices had remained below $2 for 25 successive days. Currently, prices continue to remain under this level. Additionally, companies have continued to introduce new attractive models, particularly small SUVs.

Other factors boosting growth included low interest rates and strength in the jobs sector. Taken together these have widened the average buyer’s spending power. They now prefer to buy expensive trucks and SUVs. According to automobile research company Kelley Blue Book, the average transaction price increased by 2% to $34,112 last month.

Playing the Incentive Game