This sales trend signals tough 2016: AutoNation CEO

AN CEO:  Auto industry entering challenging new chapter
AN CEO: Auto industry entering challenging new chapter

The U.S. auto industry saw record sales in 2015, but a flat December may portend a rougher road ahead, said Mike Jackson, the leader of the nation's largest dealer chain.

"Let's talk about December, which I consider to be a true bellwether month every year as an indication of what's going to happen," the AutoNation chairman and CEO told CNBC's "Squawk Box" on Wednesday. "I know it looks like a … cherry on top of this beautiful [ice cream] sundae of 17.5 million [units], but actually I think it's more like a prune."

U.S. auto sales totaled a record 17.47 million in 2015 even as December numbers trailed expectations, according to figures from research firm Autodata.

Read MoreFord's CEO is bullish on China. Here's why

"The industry calendar moved three days and a January weekend into 2015. So that's 9 percent more days. And we have 9 percent more sales. If you correct for the calendar, that means sales are basically flat [for the month]," Jackson said. "I'm looking at significantly higher inventories; higher incentives from the manufacturers; and bigger discounts from us, the retailer. We had to discount an additional $250-$300 a car, compared to a year ago."

Putting his concerns into perspective, he said: "Go back to 2000, the last time we had records, if you look at the next five years, industry sales were very good." He continued, "However, the quality of the earnings [at that time] deteriorated dramatically as the industry really couldn't manage flat sales."

"You'll hear a lot of happy talk from everybody else in the industry," Jackson said. "[But] I'm saying we're in a new chapter here."

Under this scenario, Jackson expects margins and earnings to be hurt at AutoNation for a quarter or so while the company re-positions itself through cost cutting, a reduction of inventories, and finding "the right line between volume and quality."

— Reuters contributed to this report.