July Auto Sales Missing Analyst Estimates in Early Results

(Bloomberg) —

Most automakers reported U.S. light-vehicle sales that trailed analysts’ estimates for July, reinforcing concerns that the market may have peaked with last year’s record deliveries.

The results were mixed, with declines at General Motors, Ford and Toyota and small gains at Nissan and Fiat Chrysler Automobiles. Honda was the rare exception in surprising analysts with an increase in sales instead of a predicted drop.

The reports underscored that demand is starting to wane, with automakers now projecting a long sales plateau at a healthy level instead of the robust growth that has helped the U.S. economy. Analysts had predicted July’s seasonally-adjusted selling rate would reach 17.6 million vehicles, little changed from a year earlier. Ford last week said it saw no expansion ahead after a six-year climb to record sales of 17.5 million last year.

“It’s been six years of unprecedented growth and it had to come to an end,” Michelle Krebs, a senior analyst with research AutoTrader, said in an interview. “The big question now is: How deep does it dip and how long does it dip?”

Automakers already have responded by boosting incentives to customers, with average discounts up 13 percent in the first half while industrywide sales rose 1.5 percent, according to researcher Autodata Corp.

Among the highlights of Tuesday’s sales reports:

– GM, the largest U.S. automaker, said sales slid 1.9 percent, after analysts projected a 1-percent drop. Its bread-and-butter Chevrolet division saw a 5.3 percent drop in total sales as the company cut back on deliveries to rental fleets in pursuit of better profit margins.

– Ford’s 3-percent decline was wider than the 0.5-percent decline predicted. Its sport utility vehicles had a rare down month, with drops of 22 percent for Explorer and 10 percent for the Escape compact SUV. F-Series pickup sales fell 1 percent.

– Fiat Chrysler eked out a 0.3 percent increase. Jeep sport utility vehicles and Ram Truck brands led FCA’s U.S. deliveries, both showing gains of about 5 percent.

– Toyota sales fell 1.4 percent, a smaller drop than the 2.9 percent analysts expected.

– Nissan reported a 1.2 percent increase, still short of the projection. While Nissan brand sales rose 1.7 percent on strong light-truck demand, its Infiniti premium line reported a drop as car sales fell by more than a third.

– Honda surprised analysts with a 4.4 percent increase instead of an estimated 0.4 percent decline on the back of strong crossover utility sales: CR-V sales rose 13 percent to 36,017, securing its place as the segment’s top seller.

Affordability has become the biggest impediment to buying a new car, according to a recent survey by AutoTrader. Its affiliate, Kelley Blue Book, said Tuesday that average new-vehicle prices rose 2.5 percent last month compared with a year earlier to $34,264.

“The people who could afford a car, got a car,” Krebs said. “If you look at stagnation of wages and the increase in the price of everything, cars included, there’s a lot of demand on household income that isn’t increasing.”

Ford’s marketing chief, Mark LaNeve, blamed his company’s decline in SUV sales on GM’s early July promotion offering 20 percent off sticker prices. That was “a dramatic escalation” in incentives, said LaNeve, who is vice president of U.S. marketing, sales and service.

“My dad used to say, ‘Trees don’t grow to the sky,’” LaNeve told analysts on a conference call. “We’ll adjust our plans accordingly to the reality and temper our expectations.”

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