Told You So…

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Ford Motor Co. and Nissan Motor Co. posted their biggest U.S. sales declines in years last month in an industry that is showing further signs of running out of steam.canary pic

Ford was dragged down by a 9.4 percent drop at its namesake division, while Nissan recorded its sharpest monthly decline in more than three years. Sales at General Motors and Toyota Motor Corp. dropped for the sixth time in 2016.  Fiat Chrysler chalked up another gain aided mainly by the strength of Jeep.

Overall sales fell 3.5 percent, and the seasonally adjusted annual sales rate came in at 16.97 million, the third-lowest total of the year.

The results point to the difficulties the industry will have stretching its streak of consecutive sales gains to a century high of seven years.

“It wasn’t exactly a blockbuster month in August, so that puts extra pressure on the industry to step up its game in September, especially this coming Labor Day weekend,” said Jessica Caldwell, an analysts at Edmunds.com. “We’re at a critical time where dealers need to clear out 2016 inventory to make room for 2017s.”

Third time

August marks the third month this year that volume has declined, the most monthly drops in any year since recession-wracked 2009, when volume slumped in eight individual months.

August had the same number of selling days as in 2015 — 26 — but featured one fewer weekend this year, contributing to the decline in volume most analysts expected.

The month’s 16.97 million SAAR compares with 17.79 million in August 2015 and 17.86 million in July.

“Coming off the strongest SAAR of the year at 17.9 million units in July, the industry took a bit of a step back in August,” said Bill Fay, general manager of the Toyota division.

Ford’s sales fell 8.8 percent to 213,411 with retail volume off 8 percent and fleet shipments dropping 10 percent. A 7 percent rise at Lincoln offset some of the decline at the bigger Ford division. The results marked Ford’s biggest monthly setback since August of 2010.

GM said August sales dropped 5.2 percent to 256,429 cars and light trucks. Deliveries slipped 3.9 percent at Chevrolet, 14 percent at GMC and 2.7 percent at Buick. Sales rose 3.9 percent at Cadillac.

At Toyota Motor Corp., volume dropped 5 percent to 213,125 cars and light trucks last month. Honda Motor Co. deliveries dipped 3.8 percent.

Sales fell 7.9 percent at Kia, 2.7 percent Mini, 13 percent at Mazda, 12 percent at Mitsubishi and 9.1 percent at the VW brand, where U.S. volume has slid every month beginning with November as the company struggles to move past violations of U.S. diesel emissions rules.

The Hyundai brand’s volume rose by just three units over August 2015.

Subaru posted record U.S. sales of 60,418 in August, the first time the brand has topped the 60,000 mark in a month, for a gain of 15 percent over August 2015. Thomas J. Doll, president and COO of Subaru of America, described theAugust results — which shattered the brand’s previous monthly sales record in December 2015 (56,274) — as “epic.”

 

Nissan last recorded a tumble as steep as August’s in February 2013.

Among other luxury brands, August sales rose 189 percent at Jaguar, 15 percent at Land Rover, 3 percent at Mercedes-Benz, 2.5 percent at Audi and 31 percent at Volvo, but volume slid 8 percent at BMW and 7.6 percent at Lexus.

Lexus was the top-selling luxury brand in August but Mercedes-Benz leads Lexus and BMW in year to date volume.

FCA US, helped by more generous incentives, posted a 3.1 percent August gain. Sales rose 12 percent at Jeep, 5.1 percent at Dodge and 1.6 percent at the Ram brand, but deliveries dropped 22 percent at the Chrysler brand, 21 percent at Fiat and 62 percent at low-volume Alfa Romeo.

Tough comparison

U.S. sales have now risen just 0.5 percent for the year. Even before today, analysts were divided over whether demand can top 2015’s record tally. For the remainder of the year, automakers face a tough comparison to the second half of 2015, when the SAAR topped 18 million in September, October and November.

“Looking forward [to the next few years], we continue to see industry sales as strong but at a lower level than this year,” said Mark LaNeve, head of U.S marketing, sales and service for Ford.

While profitable trucks, crossovers and SUVs continue to top consumer shopping lists, there are signs that the pent-up demand that has fueled industry volumes in recent years has been exhausted, analysts say.

“Shopping on dealer websites was down 2 percent in August compared to a year ago, and only up 3.5 percent from July 2016, another indication that new-car sales may be plateauing,” said James Grace, director of analytics product management for Dealer.com.

Other analysts — citing low gasoline prices, widely available credit and low financing costs and employment gains — believe sales still have room to grow.

“Despite sales beginning to cool off, the industry is still on pace for a record year,” said Eric Lyman, TrueCar’s chief industry sales analyst. “2015 delivered a 10-year high in August sales, so automakers faced a high hurdle to show year over year gains in August 2016.”

Industry sales continue to be driven by light trucks, notably compact crossovers and large utility vehicles.

“All the economic factors continue to point toward a strong second half of the year and another potential record year for the industry,” said Mustafa Mohatarem, GM’s chief economist. “We think the industry is well positioned for a sustainable high level of customer demand.”

TrueCar says incentive spending averaged an estimated $3,331 per vehicle in August, an increase of 7.7 percent from a year earlier. That figure was down 2.2 percent from July 2016, as automakers launched sales to clear out 2016 models.

As the market shows signs of reaching a sales plateau, automakers aren’t chasing U.S. sales at any cost, a practice that helped force GM and Chrysler to restructure in bankruptcy in 2009.

While discounts have, at least on paper, crept back up to pre-recession levels, there’s more cushion than ever: Average transaction prices are at a record high as buyers opt for bigger vehicles with plusher interiors, more electronics and driver-assist features. With profits largely protected, automakers don’t mind if the industry snaps a streak of six straight annual sales increases.

“It may or may not be a record but, look, any time you’re above 15 million is good,” said John Mendel, Honda’s head of U.S. sales. “I’m bullish on the rest of the year.”

August incentive outlays by top automakers

Manufacturer Incentive per unit August 2016 forecast Incentive per unit % change vs. August 2015 Incentive per unit % change vs. July 2016
BMW $5,670 26% -2.8%
Daimler $4,528 -1.6% -3.4%
FCA $4,146 16% -0.5%
Ford $4,084 18% -1.4%
GM $4,355 7.9% -4.6%
Honda $1,751 -17% 4.9%
Hyundai $2,595 2.2% 1.0%
Kia $2,714 -6.8% -0.1%
Nissan $3,475 1.1% -3.8%
Subaru $717 19% 7.5%
Toyota $2,370 7.3% -1.9%
Volkswagen Group $3,793 24% -2.3%
Industry $3,331 7.7% -2.2%
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7 COMMENTS

  1. It’s been my observation that the harder they advertise, the worse sales must be. Looks like we are in for CFC2 – The Uncle Strikes Back!

  2. For how crappy the economy is for the majority of us, it’s amazing they sell as many as they do.

    But people are so quick to blame the very very few areas left that are somewhat close to the free enterprise system as it gets in this day and age of cronyism. That’s what blows my mind sometimes. It’s this keep getting it wrong every time when it comes to even simple economics.

    Unfortunately, most of those economic no nothings are politicians. So it makes a bad situation far worse. They are literally stealing opportunities from people.

    • richb, the politicians like it. Their “constituents” as they would call you and I, are so glad to get all that help in buying a vehicle that will suck them dry long before they can possibly pay for it. I know this from speaking to people. Just ask and people will tell you the nitty gritty truth if they think you really care……and I do….a lot. Just recently I took a truck into the shop where a guy worked on it who hadn’t been doing truck repair long. He’d had a much higher paying job in the patch but that evaporated. His wife had a job but their house payment and vehicle payments were hurting them while he was looking for a job. His pickups(not new and one fairly old, 15 years or so)were financed at the local bank. He got right to the point of losing them and got a job. He went to the bank and showed them he’d be working Monday of the next week. This was on a Friday, the day his payments were due. He told them he’d have the money the next week(his employer agreed to help him). He owed next to nothing on both vehicles. It was a big load off his mind and he had a week-end of not being stressed to the max. He got up Sunday morning and both pickups were gone. Too bad he didn’t have me chained to them. I hate people who do the dirty rip-offs for the bank and the banks and banksters themselves. They’d had a hell of a time getting them and probably a harder time if he’d been aware of what they had planned. He’s a pretty cobby sort. He found out in the ensuing shitty that the banks lost money on both pickups since their auction prices didn’t come close to what he was going to pay them. This shit happens tens of thousands of times a day. It’s the reason there are almost brand new vehicles of every type and description on every lot. There are pickup only lots, stuffed with just like new trucks, SUV lots, car lots and cross-over lots(there are here anyway). You don’t need to waste your time walking past types of vehicles you’re not in the market for, those are all in their own lots.

      I wondered how those guys I worked with who paid rent or house payments and didn’t have anything bought brand new expensive trucks. Then I watched them lose them, maybe after a year or more of little use and no wear showing on them. I’m having a problem getting the pickup I want…..because I won’t finance it. I’m from the old school and should have never given in to credit card companies(but try just getting a motel room with cash or an out of town check, the very scenario that made me sign up for a credit card) and easy bank loans. When I buy my next pickup I’ll be holding the title and won’t owe anything on it……except the holdup tax the county will gouge me for every year.

      I used to think the UK was the worst socialist system I could imagine and then I realized the difference between the govt. owning everything was no different from the backdoor taxation we pay here. We can buy outright whatever we want from whoever we like but at the end of the year, the govt. owns it, lock, stock and barrel…..gun barrel if you don’t pay and try to keep it.

  3. I’m not sure how much of the experience was due to the drop in YOY sales, the dealer, my credit score and middle-age income; but the Cherokee I just bought was about the least painful purchase ever. Only one that beats it was when I “bought” a company vehicle as part of a severance when an employer went under. They even knocked 10% off the price of Thule roof rack rails (of course sales tax brought it right back up).

    • Yeah, I bought a VW last December and it was like buying a sweater or something. It’s kind of weird.

      Re: increases among some brands – aren’t the volumes too small to be really meaningful? If Jag or Rover leases a few more units, that has a pretty big impact on the percentage, no?

      Oh, and then there’s this: Auto loan delinquencies jumped in July

      Let’s see, easy credit leads to record sales leads to slowdowns leads to delinquencies leads to crash. Where have I seen this before?

  4. They must be getting desperate, got a call the other day from the owner (at least that’s what he claimed, probably full of it) of the local Nissan dealer. Practically begged me to trade in my Titan and buy a new one. 72 month 0% financing, 5k over blue book on my trade, free extended warranty, BIG SALE! Please, please come look! No thanks, what I have is paid for, think I’ll keep it that way til it just won’t go anymore.

    • A finite markup on new vehicles since the guy down the road is willing to knock a couple hundred(or way more)than the other guy down the road and the other guy down the road. Used vehicles have been a sellers game since the CFC debacle.

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