Auto sales skid for 7th month in a row

Trucks rise but sedans lag; dealer in­cen­tives abound

Los Angeles Times - - BUSINESS - By Russ Mitchell

SAN FRAN­CISCO — The econ­omy is grow­ing and un­em­ploy­ment is low, but con­sumers con­tinue to shy away from new cars.

For the sev­enth month in a row, U.S. car sales con­tin­ued to de­cline.

A faint bright spot is trucks and SUVs — which are con­tin­u­ing to sell fairly well — but even those pur­chases are slow­ing. And it’s not enough to make up for the de­cline in tra­di­tional au­to­mo­biles.

The big prob­lem for au­tomak­ers is sedans, which are “drag­ging ev­ery­thing down,” espe­cially at Ford and Gen­eral Mo­tors, said Brian Moody, an an­a­lyst at Au­to­trader.

The news is bad for the in­dus­try but good for con­sumers. Prices are com­pet­i­tive, and dealer in­cen­tives abound, espe­cially for small and mid­size cars.

Those in­cen­tives could be sweet­ened a tad around La­bor Day, as deal­ers pre­pare for new cars, an­a­lyst say, but not by much. Au­tomak­ers want to avoid an all-out in­cen­tives war, pre­fer­ring prof­its over mar­ket share.

Some an­a­lysts think that the shift away from sedans could be per­ma­nent, even if gas prices rise. That’s be­cause would-be car buy­ers con­tinue to grav­i­tate to cross­over SUVs. Un­like tra­di­tional sport util­ity ve­hi­cles, crossovers are less like trucks and more like cars with ex­tra room in back, and with gas mileage to match.

Mean­while, trucks and full-size SUVs have shown in­creased miles per gal­lon across prod­uct lines, as au­tomak­ers have im­proved in­ter­nal com­bus­tion tech­nol­ogy un­der pres­sure from fed­eral gas-mileage re­quire­ments.

Year-over-year ve­hi­cle sales over­all were down 5.7% in July.

If cur­rent trends con­tinue, auto an­a­lysts say, car­mak­ers are likely to sell about 17 mil­lion ve­hi­cles or fewer this year com­pared with nearly 17.6 mil­lion in 2016.

That’s hardly a dis­as­ter — that to-

tal still ap­proaches record in­dus­try highs. And July com­par­isons are espe­cially tough this time around. In July 2016 car­mak­ers posted record monthly sales in a record year for ve­hi­cle sales.

But the num­bers do sig­nal a cycli­cal down­turn, and it’s enough to force some au­tomak­ers to trim back pro­duc­tion and at least tem­po­rar­ily shut down as­sem­bly lines across the coun­try.

Ford sales were down in July 7.4% year over year; GM, 15.4%.

“We have strate­gi­cally de­cided to re­duce car pro­duc­tion rather than in­crease in­cen­tive spend­ing or dump ve­hi­cles into daily rental fleets, like some of our com­peti­tors,” Kurt Mc­Neil, head of U.S. sales op­er­a­tions for Gen­eral Mo­tors, said in a pre­pared state­ment.

But many an­a­lysts be­lieve a shift in strat­egy may be called for.

“GM needs to con­sider ap­ply­ing tough-love met­rics to some car lines,” said Re­becca Lind­land, an an­a­lyst at Kel­ley Blue Book. “The Chevy Colorado mid­size pickup truck out­sold the Ca­maro, Im­pala, Sonic and Spark — com­bined — in July.”

Mean­while, Toy­ota sales were up 3.6%, and its sedan sales have held up bet­ter than most com­peti­tors’.

Sedan buy­ers still ex­ist, of course, and Honda and Toy­ota are the cream of the crop for mass-mar­ket sedans, said Alec Gu­tier­rez, also of Kel­ley Blue Book. Ap­par­ently, the idea that cars from U.S. com­pa­nies are in­fe­rior to Ja­panese brands, de­vel­oped for good rea­son decades ago, con­tin­ues to haunt Ford and GM, de­spite enor­mous gains in qual­ity since then.

The Ford Fu­sion and the Chevy Mal­ibu “from a prod­uct per­spec­tive are just as good as Honda and Toy­ota,” Gu­tier­rez said. “But the per­cep­tion isn’t there, and they have to [spend more on] mar­ket­ing and ad­ver­tis­ing.”

Ford, in its pub­lic state­ments, fo­cused on its SUV sales, up 2.2% in July.

“Cus­tomers across the coun­try drove retail gains of Ford brand SUVs in July. SUV retail sales were up 9.1% na­tion­ally, with growth in ev­ery re­gion of the coun­try. High-se­ries SUVs were in strong de­mand with cus­tomers rep­re­sent­ing nearly 30% of retail sales,” said Mark LaNeve, Ford vice pres­i­dent of U.S. mar­ket­ing, sales and ser­vice.

Au­tomak­ers are also grap­pling with fuel emis­sions stan­dards un­der the Trump ad­min­is­tra­tion, which is con­sid­er­ing cut­ting back on Obama-era re­quire­ments. Au­to­mo­tive News re­ported that the auto in­dus­try’s top trade group, the Al­liance of Au­to­mo­bile Man­u­fac­tur­ers, is push­ing for a “three-way pact” among au­tomak­ers, the Trump ad­min­is­tra­tion and the state of Cal­i­for­nia on emis­sions stan­dards.

Gov. Jerry Brown has said Cal­i­for­nia, which is al­lowed to set its own re­quire­ments, re­mains com­mit­ted to tough stan­dards.

Not want­ing to have to make ve­hi­cles sep­a­rately for Cal­i­for­nia, which would hurt the in­dus­try fi­nan­cially, au­tomak­ers would rather reach a com­pro­mise, the trade group said.

Ac­cord­ing to Au­to­mo­tive News, al­liance head Mitch Bain­wol wrote for a slideshow he’s sched­uled to present Tues­day at a con­fer­ence in Michi­gan that there is wide con­sen­sus on fuel econ­omy and green­house gases. “The only is­sue is the de­gree of the slope,” he wrote. In other words, how fast the in­dus­try needs to move in emis­sions re­duc­tion.

Jewel Sa­mad AFP/Getty Im­ages

VE­HI­CLE sales over­all fell 5.7% in July. A faint bright spot was trucks and SUVs, but even those pur­chases are slow­ing. At top, Ford Fu­sions for sale in 2015; above, the GMC Aca­dia at a 2016 auto show.

Keith Srako­cic As­so­ci­ated Press

Char­lie Riedel As­so­ci­ated Press

WOULD-BE BUY­ERS con­tinue to grav­i­tate to cross­over SUVs while trucks and full-size SUVs have shown in­creased miles per gal­lon across prod­uct lines. Above, a Ford F-150 truck at a fac­tory in Missouri in 2015.

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