Coverage: Auto sales slump in January

After a record year of sales of cars and light trucks in 2016, January sales fell 1.8 percent, calling into question whether the auto market is ripe for a slump.

Michael Wayland of The Detroit News had the details:

Demand for utility vehicles such as crossovers, SUVs and pickups continued to help many automakers offset heavy losses in passenger cars, which experienced a 12.2 percent decline to roughly 427,600, or 37.4 percent, of the more than 1.14 million vehicles sold last month.

“January may be suffering a bit of a hangover from those rocking deals we saw in December,” said Autotrader senior analyst Michelle Krebs, referring to year-end and holiday deals that drove strong sales of 1.69 million vehicles to end last year. “It appears new-car shoppers are taking a bit of a breather.”

The slight decline last month was in line with analyst expectations and sets the year up to be on par with record-setting sales of 17.55 million in 2016. Most analysts expect sales to plateau this year for the first time in the last decade or so. However, they differ on if the industry has enough gas in the tank to reach a third consecutive year of record sales.

Autotrader and Kelley Blue Book forecast sales in the range of 16.8 to 17.3 million vehicles in 2017, which would represent a 1 percent to 4 percent decrease from 2016. Edmunds.com is within those expectations with a forecast of 17.2 million.

Michael Colias of MarketWatch.com reported that GM and Ford both posted sales drops in January:

GM, the No. 1 U.S. auto maker, sold 195,909 vehicles in the month, compared with 203,745 a year ago, for a sales decline of 3.8%. Retail sales declined 4.9%.

Ford’s sales, meanwhile, edged 0.7% lower to 171,186. The Detroit auto maker reported its retail sales climbed 6% while fleet sales declined 13%. Ford said its popular F-series pick up trucks — up 13% — saw their best sales start for the year since 2004.

GM said its Jan. 31 inventory was equivalent to more than 100 days’ of supply, reflecting a broader spike in dealer stock for the industry. High inventories have traditionally led to discounting and layoffs.

GM’s inventory, for instance, could come down in coming months as the auto maker lays off thousands at car plants in the U.S. Demand for sedans and compact cars has slumped amid low gas prices, which typically boost buyers’ appetite for trucks and SUVs.

Jamie Butters and David Welch of Bloomberg report that Toyota and Fiat Chrysler also showed declines:

Deliveries fell about 11 percent for both Toyota and Fiat Chrysler Automobiles NV. Sales also dropped for General Motors Co. and Ford Motor Co., pacing a 1.8 percent decrease for the industry in January, according to Autodata Corp.

Automakers spent about $645 more per vehicle on discounts, about $3,635 on average in January, according to ALG, which projects car and truck resale values. The industry relied on rich incentive offers and deliveries to rental-car companies and other fleet customers last year to seal a seventh straight year of expansion. Strong demand for pricier pickups and sport utility vehicles should ensure that automakers keep profits rolling.

“There is certainly weakness to start off the year,” said Jeff Schuster, senior vice president of forecasting for LMC Automotive. “It’s not unexpected given the overheating of sales, thanks to incentives in December.”

Monthly sales slowed to a seasonally adjusted annualized rate of about 17.6 million vehicles, from 17.9 million a year earlier, according to Woodcliff Lake, New Jersey-based Autodata. The pace beat the 17.3 million average estimate among analysts and compares with 18.4 million in December, the best in more than a decade.