Images
Despite booming sales of trucks and SUVs, the industry might not be as great as it seems. Image source: Ford Motor Company.

If you want an example of how frustrating the market can be for investors, this morning brings us all a great example. Just yesterday the U.S. automotive industry reported setting an all-time sales record during 2015: Sales topped the previous record, set in 2000, to reach 17,470,659 units.

A mere day later, shockwaves are going through the automotive retail industry, causing AutoNation (NYSE:AN), America's largest auto retailer, to drop roughly 11% by noon EST. Peers are also dropping: Lithia Motors (NYSE:LAD) is down roughly 10%, as is Group 1 Automotive (NYSE:GPI), and even CarMax (NYSE:KMX) is trading more than 6% lower.

Let's dig into AutoNation's December sales data as well as the comments that sent these companies lower this morning.

Good December, or bad?
While major auto manufacturers such as Detroit's Ford and General Motors helped set a record 2015 with a strong December sales result, AutoNation's sales figures also mirrored a strong month, at least at first glance. AutoNation reported that its retail sales nearly reached 36,000 units during December, a 9% increase over the prior year.

Looking closer, AutoNation's December new-vehicle results showed sales for its domestic brands were up 16% year over year to nearly 11,000. Its import sales were up 9%, reaching nearly 16,000 units. Sales of AutoNation's luxury vehicles were only up 2%, and checked in at just under 9,000 units.

However, on a same-store basis, the retailer's new-vehicle sales in December increased only 5% year over year, and, according to AutoNation, industry reporting for December includes three additional calendar days than last year.

In addition to the lower same-store sales figures and extra calendar days, the comments from AutoNation CEO Mike Jackson in a press release are largely to blame for the decline in the auto industry today, after he noted that these sales gains also came with a consequence:

The fourth quarter industry sales environment was more push versus pull. As a consequence, we expect to report significant margin declines for the fourth quarter in both our new and used retail unit sales. We have begun, and will continue through the first quarter, to take the necessary steps to align our costs, inventory, and pricing strategy to adjust to the current market. In 2016, we expect industry new vehicle unit sales will continue to exceed 17 million. 

Fears coming true?
Despite 2015 being a huge sales year for major automakers, in the back of investors' minds was always the worry that when sales peaked, the automakers would resort to old incentive wars to gain market share -- a large reason Detroit automakers have posted huge profit losses in the past. Jackson's comments are a clear warning that the margins and profits investors and the automakers have enjoyed could be strained sooner rather than later.

Furthermore, when Jackson spoke about overall auto industry sales today during an interview on CNBC, he pointed directly to incentives: "This plus 9% [industry sales growth in December] is misleading. Look at the discounting it took to get it done and let's take stock... We and the industry will have to manage differently." As an example of the consequences from discounting, AutoNation currently expects its fourth-quarter financial results to show a decline of between $250 to $300 gross profit per vehicle -- on both new and used vehicles.

Ultimately, it looks as if 2016 could bring proof of whether or not major automakers have learned their lesson from past incentive wars. Stay tuned: This development is arguably the most important for auto investors to keep an eye on this year. 

Daniel Miller owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends CarMax. The Motley Fool recommends Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.