Plunge in auto sales suggests economic jitters rising here

After slipping for three straight months, regional new vehicle sales plummeted by more than 30 percent in April from a year earlier, suggesting that economic jitters in the oil patch have consumers in Houston hunkering down for leaner times.

“When auto sales start to fall, that’s a suggestion that consumer confidence is falling as well,” said Patrick Jankowski, senior vice president of research with the Greater Houston Partnership.

Year to date, sales are down 13.2 percent — a far steeper decline than the 4 percent annual dip that was forecast at the beginning of the year.

The numbers stand in stark contrast to national figures showing Americans brought 3.5 percent more new cars, trucks and

SUVs last month than in April 2015.

“I think what’s happened is it’s finally caught up,” Steve McDowell, owner of InfoNation, which compiles the local sales figures for TexAuto Facts. “I think all of the issues are beginning to affect what we’re doing.”

In all, 23,652 new vehicles were sold in the ninecounty Houston area last month, but that is 11,600 fewer than in April 2015, according to Sugar Landbased TexAuto Facts.

Much like home sales, automobile sales are akin to a region’s economic pulse, Jankowski said. But the real estate dip has been far less precarious, suggesting to Jankowski and McDowell that consumers are hopeful enough to remain comfortable with longer-term payments like a mortgage, but less so when it comes to shorter-term auto loans.

“People aren’t going to make big-ticket purchases when they’re concerned,” McDowell said.

Crude oil prices have recovered slightly of late, but they remain far below their highs of two years ago. The impact has been severe in the energy-dependent Houston region, with layoffs mounting and the number of bankruptcies climbing.

Elsewhere in the country, the economy continues to recover from the housing crisis and severe recession. Steady job growth nationally has resulted in steady growth of national auto sales, McDowell said.

Flooding closed stores

April flooding didn’t help matters locally.

Virgil Skinner, owner of Fort Bend Kia and chairman of the Houston Auto Dealers Association, said his and many other dealerships closed early on the first day of the floods as employees couldn’t get to work. Store traffic was slow for many in following days as the floods and related problems continued. That erased a week or two of normal sales activity.

“If you lose a week in the car business, it’s a really big impact on the profitability of the store simply because your overhead expenses keep going,” Skinner said.

He predicted that insurance settlements could provide some energy in May.

However, Skinner acknowledged the negative impact of the energy downturn, curbing both sales and showroom traffic.

“I think it’s a trickledown,” Skinner said. “It took some time for it to affect the economy.”

Dealers insist it’s a good time to buy. Sellers have good inventory, manufacturers continue to offer incentives and banks continue to lend, said Steven Wolf, vice president of Helfman Dodge. May started off busy, he said, though it has “lost some of its steam.”

The next intense sales period is Memorial Day weekend, which typically brings good buyer traffic.

Typically, vehicle sales tick upward in March and soar into the high-powered summer sales season before tapering off in September and toward the end of the year.

“Hopefully, we’ll start seeing something happen on the positive side,” Skinner said.

Lower gas prices

Ana Rodriguez, owner of a local landscaping business, sees both sides of crude’s prolonged fall. Paying less than half what she paid for fuel several months ago encouraged her to buy a 2016 Jeep Wrangler Sahara from Helfman Dodge Chrysler Jeep Ram Fiat.

“If the gas prices were what they were a couple of months ago, near $3, I don’t think I would be in the mood to buy a vehicle,” she said.

But Rodriguez also has friends in the oil industry who are feeling the pain.

Biggest sales hit

The market segment that includes vehicles under $30,000 took the biggest sales hit in April, McDowell said, slipping 3.2 percent to 41.9 percent of the regional market share.

Trucks and SUVs continued dominating regional market share, data show. The share of trucks and Sums sold that month rose to 64.4 percent, up from 62 percent in March.

Pickups accounted for 22.3 percent of vehicles sold, up from 18.9 percent in March.