Auto sales fall 3% in on­go­ing de­cline

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - TOM KRISHER

DETROIT — Un­em­ploy­ment is down, con­sumer con­fi­dence is up, and gaso­line prices and in­ter­est rates are still low.

Even so, U.S. auto sales fell 3 per­cent last month.

It was the sixth straight monthly de­cline as sales dropped off last year’s record pace. For the first six months, car and truck sales fell 2.1 per­cent, the first such de­crease since the fi­nan­cial cri­sis in 2009.

But auto ex­ec­u­tives and in­dus­try an­a­lysts say it’s no cause for panic. Sales are still strong and aren’t ex­pected to plunge any­time soon. Plus, buy­ers are still load­ing out trucks and SUVs with high­priced op­tions, and that’s likely to im­prove earn­ings, at least in Detroit.

Sales are fall­ing largely be­cause peo­ple who de­layed car and truck pur­chases in the years since the re­ces­sion have bought new ones, said Jessica Cald­well, ex­ec­u­tive direc­tor of anal­y­sis for Ed­munds.com. “We’re kind of at the point where we don’t have a boost from that,” she said.

Also, auto com­pa­nies are cut­ting lease deals as used-car val­ues fall, cur­tail­ing an­other in­cen­tive to buy. And peo­ple with lower credit scores are feel­ing the pinch from lenders tight­en­ing stan­dards a bit, send­ing many into the used car mar­ket, Cald­well said.

In June, Ford, Gen­eral Mo­tors, Fiat Chrysler and Hyundai all re­ported sales drops. Fiat Chrysler sales were down 7.4 per­cent, while Ford said its sales de­clined 5 per­cent. GM was off 4.8 per­cent and Korean au­tomaker Hyundai posted a hefty 19.3 per­cent de­crease. Nis­san, Toy­ota and Honda each re­ported small in­creases Mon­day, but they weren’t large enough to off­set de­clines in Detroit. Volk­swa-

gen brand sales rose 15 per­cent over de­pressed num­bers from last June.

Au­to­trader se­nior an­a­lyst Michelle Krebs said the small first-half dip is not an in­di­ca­tion of broader eco­nomic trou­bles. She doesn’t ex­pect a big re­cov­ery in the sec­ond half of the year, but also doesn’t see a huge de­cline, pre­dict­ing ful­lyear sales from be­tween 16.8 mil­lion to 17.3 mil­lion. That’s still be­low last year’s record of 17.55 mil­lion.

“We think the sec­ond half could be a lit­tle bit stronger than the first half was,” said Krebs, who ex­pects 2016 still to be the fifth-best year on record. “We don’t see any im­bal­ances that sug­gest any­thing is go­ing to col­lapse.”

U.S. buy­ers continued a trend they’ve been fol­low­ing for years, pur­chas­ing SUVs and trucks and shun­ning cars. Car sales fell 13 per­cent in June while trucks and SUVs rose 4 per­cent, ac­cord­ing to Au­to­data Corp. Trucks and SUVs ac­counted for 63 per­cent of sales last month. Just five years ago they were less than half.

Sales of Toy­ota’s Camry, nor­mally the top-sell­ing non­pickup in the U.S., fell nearly 10 per­cent. But Ford’s F-Series pickup, the top-sell­ing ve­hi­cle in Amer­ica, rose nearly 10 per­cent.

Slow­ing car sales are good for con­sumers who are look­ing to buy a car, Cald­well said. Dealer in­ven­to­ries are grow­ing be­fore pro­duc­tion cuts take ef­fect, and dis­counts are ris­ing.

Even with the sales de­cline, auto prices re­main high, ac­cord­ing to J.D. Power and LMC Au­to­mo­tive. The av­er­age ve­hi­cle sold for $31,720 in June, a record for the month, sur­pass­ing the old record of $31,073 set last year. But some au­tomak­ers are hav­ing to raise dis­counts and sell more ve­hi­cles to rental car com­pa­nies to keep their sales

num­bers up. Av­er­age in­cen­tive spend­ing per ve­hi­cle in June was $3,661, also a record for the month. Even spend­ing on trucks and SUVs is up about $350 from last year, J.D. Power and LMC es­ti­mated.

The gen­eral man­ager of the Honda di­vi­sion in the U.S., Jeff Con­rad, con­ceded that the com­pe­ti­tion is stiff. He said Honda posted an in­crease “against a sea of com­peti­tors cling­ing to mar­ket share via heavy in­cen­tives and fleet sales.”

The shift to­ward cars is good news for com­pa­nies such as Ford, GM and Fiat Chrysler, which rely heav­ily on pick­ups and SUVs.

Mark LaNeve, Ford’s vice pres­i­dent of sales, said that even though Ford’s re­tail sales to in­di­vid­ual cus­tomers were down 1 per­cent in the first half of the year, its rev­enue will be up be­cause of strong sales of loaded-out pickup trucks.

The shift won’t be such good news for brands like Hyundai, which is heav­ily de­pen­dent on car sales. Sales of Hyundai’s Elantra com­pact car, nor­mally among the brand’s top-sell­ing ve­hi­cles, fell more than 40 per­cent to just over 13,000. A year ago, Hyundai set a sales record for the month of June.

AP/GENE J. PUSKAR

Chevro­let ve­hi­cles fill a deal­er­ship lot in Pitts­burgh in this Jan­uary photo. Gen­eral Mo­tors sales fell 4.7 per­cent in June amid a broader in­dus­try sales de­cline now en­ter­ing its sixth con­sec­u­tive month.

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