Media Moves

Coverage: Auto sales continue to slump

July 5, 2017

Posted by Chris Roush

auto sales Screen Shot 2016-10-03 at 6.07.15 PMMajor automakers reported a fourth consecutive month of lower U.S. new vehicle sales for June and came in below analyst expectations, despite hefty consumer discounts and looser loan terms.

Nick Carey of Reuters had the news:

Automakers’ shares rose, however, as retail sales to consumers were relatively stable at the U.S. automakers, with General Motors Co asserting that the industry was set for a stronger finish to the year.

Industry consultant Autodata put the industry’s seasonally adjusted annualized rate of sales at 16.51 million units, which was the lowest rate since February 2015. It came in below Wall Street expectations of 16.6 million vehicles and 2 percent lower than the June 2016 figure.

U.S. consumers continued to shun passenger cars in favor of larger pickup trucks, SUVs and crossovers. Passenger car sales were also hurt as some automakers, including GM, have moved to reduce relatively low-margin sales to rental agencies.

The U.S. auto industry has been bracing for a downturn after hitting a record 17.55 million new vehicles sold in 2016. A glut of nearly new used vehicles poses competition for new vehicle sales and automakers have relied increasingly on consumer discounts and loosened lending terms.

Car shopping website Edmunds said the average length of a car loan reached a record high of 69.3 months in June.

Brent Snavely of the Detroit Free Press reported that sales of the big three — GM, Ford and Chrysler — were all disappointing:

Fiat Chrysler Automobiles announced its sales fell 7% in June while sales also fell 5.1%  for Ford and 4.7% for General Motors amid a broader decline for an industry that is now entering its sixth consecutive month.

Sales of Ford SUVS such as the Explorer, Edge and Flex were strong in June but not enough to overcome a 23% drop in car sales. The story was similar for GM, where a number of new or recently launched SUVs, such as the Chevrolet Equinox and Buick Envision, could not counteract falling sales of cars such as the Chevrolet Cruze, Malibu and Impala.

At Fiat Chrysler, sales rose 6% for Ram and soared for the Alfa Romeo brand but fell 11% for Jeep — a surprising decline for a brand that sells nothing but SUVs in a market where SUVs are the best-selling vehicles.

“Yes, Jeep is shifting around its models, but this is Jeep’s market and one you would think they would be able to capitalize on it,” said Michelle Krebs, senior analyst for AutoTrader.com.

Nathan Bomey of USA Today reported that automakers are still reporting fat profits:

An uptick in dealer incentives — including the longest-term loans in the industry’s history, according to Edmunds.com — wasn’t enough to fuel an increase in the first half. Average discounts accounted for 10.2% of average prices so far in 2017, compared to 9.8% in 2016, according to Kelley Blue Book. But the automakers are still remaining disciplined by not splashing incentives on all vehicles, Krebs said.

Still, at the current sales pace, automakers are reaping healthy profits as consumers remain confident and gas prices remain low. Prices averaged $2.24 per gallon on Monday morning, according to GasBuddy, in one factor contributing to the shift from cars into larger vehicles. Design preferences are also contributing, according to industry research, as many baby boomers prefer crossovers for their high-riding stature and Millennials prefer the extra space for their growing families.

Mid-size cars lost 2.2 percentage points in market share in the first half of the year, falling to 10.9%, according to Kelley Blue Book. Meanwhile, mid-size SUVs and crossovers gained 1.4 percentage points in market share, rising to 12.8%.

Although automakers that have bet heavily on cars are suffering losses in that area, the transition to more profitable SUVs and crossovers eases the pain.

“We still believe that 2017 will be another solid year,” Toyota sales chief Bill Fay said.

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