FORD, AMAZON invest in Rivian electric vehicles
DETROIT — Auto sales slowed in the first half of 2019, compared with a year earlier, and industry experts say the back half of the year could be bumpy and unpredictable.
The good news for automakers is that their new vehicles are commanding higher prices from consumers, reaching new record levels.
The Detroit Three weathered trade wars and tariffs, job cuts, factory idling and rising costs of new technology through June. The first-half sales results were mixed, with the trio’s total sales down, mitigated by strong sales in pickups and SUVs.
Industry experts say sales will continue to slow and market disruptors could surface that will likely lead to lower annual car sales this year versus last year.
“If the first half was volatile, are you expecting the second half to be calm?” said Cox Automotive Chief Economist Jonathan Smoke. “You’d be out of your mind, just considering the number of things facing the economy and the auto market combined.”
For the quarter, Ford sales, including its luxury brand Lincoln, declined by 4.1 percent to 650,336 vehicles, and sales through June were down 2.9 percent to 1.24 million. The results were supported by strong pickup sales and a 1.3 percent gain in Lincoln sales through June.
Ford saw its biggest decline in the car segment, where, year to date, sales are down 22.5 percent, compared with the same period last year. But its pickup sales are up 5.9 percent. Sales of the F-Series through June were flat at 448,398, but heavy-duty pickups saw a 52.8 percent increase.
For the automakers total sales year to date, Fiat Chrysler Automobiles reported a dip of 2 percent to 1.1 million vehicles, compared with the first half of 2018. General Motors reported a 4.2 percent decline in total sales to 1.4 million vehicles sold.
Among other automakers reporting sales Tuesday, Nissan Group, which includes its luxury brand Infiniti, reported year-todate sales down 8.2 percent to 717,036. Likewise, Toyota Motors North America, which includes Lexus, reported its sales through June were down 3.1 percent to 1.15 million. Subaru reported its sales are up 5.2 percent to 339,525 through June. American Honda reported that through June, its sales dropped 1.4 percent to 776,995.
Automakers saw transaction prices on both cars and light trucks continue to rise and set records so far this year.
According to the latest National Automobile Dealers Association Average Dealership Financial Profile Series from April 2019, the average new vehicle transaction price was $36,642, up 3.3 percent when compared with the yearago period. Transaction prices on used vehicles sold by franchised dealers, on average, rose 3.8 percent to $20,979.
The average monthly payment gap between new and used vehicles continues to widen, which NADA said will likely push consumers to the used market.
Pickups and SUV sales remain a bright spot for automakers, said Tyson Jominy, vice president of data and analytics consulting at J.D. Power. That, along with rising transaction prices, means more profitable sales even as volume declines.
Total automaker revenues are expected to be up over 1 percent when compared with the prior year, largely driven by 4 percent growth in average transaction prices, Jominy said.
But it’s at the lowest end of the market where there is the “most dramatic story,” Jominy said. Year to date, he said, sales for vehicles with transaction prices below $20,000 are off 21 percent after falling 19 percent in 2018. But for vehicles priced $30,000 to $50,000, sales are up 5 percent. And for those priced over $50,000, sales are up 9 percent.
GM believes the industry will sell a “healthy 17 million units” this year, said its chief economist, Elaine Buckberg.
“The U.S. economy continues to grow at a healthy pace. Jobs are plentiful and inflation remains low,” Buckberg said. “Auto demand was better than anticipated in the first half, and we expect strong performance in the second half of the year. If the Fed cuts rates, as widely expected, lower financing costs will provide further support to auto sales.”
But Cox Automotive predicts that carmakers will sell substantially fewer new cars for the year. It estimates that auto sales will be 16.8 million new cars, down from the 17.3 million purchased last year amid unstable markets and political, economic and labor uncertainties.
NADA Senior Economist Patrick Manzi also puts the annual retail sales estimate at 16.8 million. “We remain confident, barring any unexpected shocks, that franchised dealerships are on track to sell 16.8 million new light vehicles in 2019,” he said. “The downside risks to our sales forecast include the fallout from trade disputes, including potential tariffs on autos and auto parts, and the Fed changing course on interest rates.”