US Demand for Autos Fall in July
$GM, $F, $HMC, $TM, $VLKAY
US auto sales drop in July as hot weather and softening demand kept buyers at home.
Major automakers have reported July sales that fell short of expectations, which has reinforced worries that the market may have peaked with last year’s record numbers.
Kelley Blue Book predicted a 1% decline from last July to about 1.5-M new cars and trucks. Sales were strong at the beginning of the month thanks to Independence Day promotions, but weakened after that.
General Motors’ (NYSE:GM) sales fell 2% while Ford’s (NYSE:F) US sales fell 3%. Toyota’s (NYSE:TM) sales slipped 1%. Fiat Chrysler’s (NYSE:FCAU) sales were flat. Volkswagen’s (OTCMKT:VLKAY) sales fell 8%.
Some automakers eked out sales increases.
Hyundai’s sales were up 6% and Honda’s (NYSE:HMC) sales rose 4%. Nissan’s were up 1%.
After 6 straight years of growth, and record sales of 17.5-M new autos last year, US sales are beginning to plateau.
In 1-H of last year, for example, sales were up 4%, or more than 2X the pace of this year. But low gasoline prices, low interest rates, enticing new vehicles and strong consumer confidence should keep them at a very high level.
Plateauing auto sales could be a good thing for consumers, since automakers are dialing up the discounts in order to hold on to their market share.
TrueCar said industry incentives were up 5% over last July to an average of $3,225 per vehicle. Ford, Volkswagen, BMW and Fiat Chrysler had the biggest increases over last July, TrueCar said.
But incentives are a dangerous game for automakers, since they hurt profits and resale values and artificially inflate demand, automakers are approaching a level of incentive spending last seen during the recession, and that is risky and unhealthy.
Some economists worry that this could be a precursor to broader bad news, as the peak and turn in auto sales may be an ominous sign for the underlying trend in consumer spending.
Analysts expects to see a decline in 2-H of Y 2016 and into Y 2017