Big 3 sales fall sharply in July as auto industry cools
Consumers can expect a lot more incentives, deals in bid to clear lots
Buyers can expect sweeter deals on small and midsize cars as automakers try to clear out excess inventory amid declining sales, even as larger vehicles continue to sell well.
For shoppers, it’s a tale of two lots. On one lot are passenger cars, which are flailing as gasoline prices fall. On the oth- er are crossovers, sport-utility vehicles and pickups, which are flourishing as drivers choose roomier designs.
The divergence deepened in July as overall auto sales fell 7% from a year earlier to 1.42 million vehicles, according to Autodata.
With struggling passenger cars, “consumers are going to start to see better incentives, lower financing, possibly more 0% interest rates, more cash on the hood to move these vehicles,” AutoPacific analyst Dave Sullivan said. “You’re not necessarily going to find significant sums of cash to move crossovers right now.”
In addition, buyers eventually will have fewer choices of passenger cars as automakers shift more of their engineering resources into crossovers, SUVs and pickups.
Average discounts per vehicle rose 5% to about $3,600 compared with a year earlier, Kelley Blue Book analyst Alec Gutierrez said. Meanwhile, transaction prices increased about 1.7%, meaning the effective price people paid was lower overall.
Automakers are turning to cash incentives and financing offers to keep the sheet metal moving, particularly with passenger cars. Average interest rates on new-vehicle loans hit their lowest level in six months as automakers promoted zero-financing offers, according to Edmunds.com.
And the average length a new vehicle sat on a dealership lot in July was 76 days, the highest in that month since 2009, according to Edmunds.
Most of the extra discounts were concentrated on passenger cars, but deals weren’t even across the board.
Japanese automakers Toyota, Honda and Subaru maintained lower-than-industry-average incentives and still reported resilient sales. Toyota and Subaru bucked the industry trend by reporting sales gains of 3.6% and 6.9%, respectively. Meanwhile, Honda’s car sales held up impressively, powered by a strong month for the Civic compact
sedan.
But General Motors, Ford and Fiat Chrysler, the three automakers traditionally known as the Big 3, were down 15.5%, 7.4% and 10.5%, respectively.
Small car sales fell 12%, while midsize car sales declined 16.2%, according to Autodata.
Subcompact cars such as the Hyundai Accent, Chevrolet Sonic and Ford Fiesta posted doubledigit declines. Midsize cars such as the Chevrolet Malibu, Ford Fusion and Nissan Altima also suffered double-digit decreases. But crossovers such as the Honda HR-V, Toyota RAV-4 and Subaru Outback enjoyed double-digit increases.
Despite the tumble for passenger cars, overall industry sales remain near historic highs. IHS Markit projected full-year sales of 17.1 million vehicles, trailing 2016’s record 17.6 million.
“We’re still operating at a very high level,” Ford U.S. sales boss Mark LaNeve said.
At these volumes, most automakers remain very profitable.
“From a macro perspective the fundamentals in the industry are very, very strong,” Gutierrez said.
Three of GM’s four brands posted double-digit percentage sales declines in July. Chevrolet was down 15.4%, Cadillac fell 21.7% and Buick plunged 30.5%, while GMC was down 7.3%.
There were few bright spots. The company has been focusing heavily on sales to consumers, but retail sales declined 14% for the month. GM’s sales to fleet customers, including rental car firms, fell sharply, too.
Ford said its retail sales fell 1% while fleet sales declined 26.4%. The flagship Ford brand fell 7.7%, while the luxury Lincoln brand declined 2.5%. Car sales were off 19.4%, including a 12.5% decline for the Ford Fiesta subcompact and a 42.2% decline for the Fusion midsize car.
All of Fiat Chrysler’s major brands, except Ram, were down double-digits. Jeep was down 12.3%, Chrysler 30.1%, Dodge 11.9% and Fiat 18%. Ram sales were flat. Retail sales were down 6%, while fleet sales were down 35%.