The U.S. auto industry has crossed over from expansion to contraction. The general U.S. economy is still strong and building, but for the folks who build or sell light vehicles, it's increasingly clear that seven years of sales growth is ending.
But this is no esoteric college sophomore debate about the relative merits of living in a comfortable but descendant society or a spartan but ascendant one.
This is real -- the kind of momentum shift where auto factory workers start being laid off instead of hired.
On an industry level, it doesn't look like much right now. Through seven months, U.S. auto sales are down just 2.9 percent from 2016's record-year pace. Indeed, total revenue might even be higher than a year ago. Through June, when the unit decline was just 2.1 percent, Kelley Blue Book calculated industry transaction prices were 2.9 percent higher.
But below the benign-looking surface of industry averages, it's a violent world. For a fourth straight year, cars are getting slaughtered. Trucks of any type are sizzling hot, and frequently in short supply.
The shift is masking the reality of transaction prices. Kelley Blue Book notes that most of the ATP gains are simply from product substitution. Looking at the three most popular sizes of sedans -- the ones that mostly share their platforms with SUVs and crossovers -- buyers pay $7,600 to $12,800 more for the sit-high versions than the corresponding size sit-low sedans, KBB data reveals. What's the difference in manufacturing cost between a sedan and a taller crossover built on the same platform? Peanuts.
Because some manufacturers have better car-truck mixes than others, our rapidly changing marketplace creates big winners and big losers.
A sit-high world is just ducky for trucky brands. And a hard-rock life for car-dominated marques. It's not just the big differential between manufacturing cost and pricing. It's also supply and demand.
Virtually everybody is frantically pushing to get more sit-high models into their product lineups, but it takes years to do so. In the meantime, those slow-selling cars pile up while scarcer crossovers and SUVs fly off dealer lots.
In 2013, cars captured 50.1 percent of the U.S. market. Last month, the car share had plummeted to 35.6 percent. With a product cycle of five or more years, it's almost impossible to adjust to a swing that severe.
And marketing demands compound the problem. Incentive spending must ratchet up to clear out the slow-moving iron. Car-heavy automakers can end up with falling sales, low ATPs and high incentives.
Take the Hyundai brand. So far this year, its product mix is 65.1 percent cars, among the lowest, and sales are down 13 percent. In July, ALG estimates its ATP at $22,601, a full 10 grand below industry average and down 1.2 percent from a year earlier. And Hyundai's July incentives as a percentage of ATP hit 14.4 percent, up from 11.2 percent last July. A vicious circle indeed.
By comparison, Toyota Motor Sales has boosted its truck mix to 56.9 percent. Its seven month sales are down less than the industry average, its ATP of $31,318 is 1.7 percent higher than last July and incentives are 8.1 percent of ATP, well below the industry's 10.8 percent. That's more of a virtuous circle.
The payoff? In July, its 3.6 percent sales increase in a down market was mostly because "it had the right product mix on dealer lots," Cox Automotive analyst Alec Gutierez concluded Tuesday.
Both automakers are working hard to make the most of the conditions they have. Everybody is.
That's the good news for the industry as a whole. So far automakers are managing the start of the sales decline well: developing new vehicles, adjusting production, watching costs.
But for the rest of us, forget that industry average. Instead, watch how winners and losers play the hand they have been dealt.
Jesse Snyder is a senior correspondent for Automotive News.