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The biggest U.S. automakers on Tuesday reported July U.S. sales that disappointed Wall Street as skittish investors feared the industry's long pleasure trip of strong sales may soon be over, sending their shares skidding about 4 percent.
General Motors Co (N:GM) reported that sales fell 2 percent to 267,258 vehicles, at the low end of expectations, while Ford Motor Co (N:F) posted sales of 216,479 vehicles, down 3 percent. Each of Ford's four top-selling models lost ground, including the Explorer SUV, which dropped 22 percent. GM and Ford are the market leaders by sales volume.
Fiat Chrysler Automobiles NV (MI:FCHA) (N:FCAU), the No. 4 by U.S. sales, said its sales rose 0.3 percent, missing estimates.
"The growth is over," Ford Chief Financial Officer Bob Shanks said in an interview with Reuters last week. Pent-up demand built during the last recession has been satisfied, and lower used car prices are drawing some buyers away from new vehicles.
Wes Lutz, owner of Extreme Chrysler Dodge Jeep Ram in Jackson, Michigan, said consumers "are maxed out and can barely afford the vehicles they are driving." Lutz said he is expanding his used car showroom, anticipating that new vehicle sales will decline.
Still, July U.S. auto sales remained strong as consumers continued to spend on pickup trucks and SUVs but GM, Ford and FCA each fell below expectations of Wall Street analysts.
Toyota Motor Corp (T:7203), No. 3 in the U.S. market, reported sales down 1.4 percent, but it surpassed expectations.
Incentive spending in July was 9.9 percent of average vehicle selling prices, up from 9.6 percent a year earlier, said auto sales website and industry analyst TrueCar Inc. (O:TRUE)
“What is interesting to note is that while overall national retail spending remains strong and consumer confidence is relatively unchanged, we are probably seeing some attempts in incentive spending to boost auto sales beyond its organic demand,” said Oliver Strauss, TrueCar chief economist.
Analysts' estimates of July sales, on an annualized basis, ranged from 17.5 million to 18.1 million vehicles. A wider poll of 21 economists by Reuters showed expectations, on average, of 17.36 million vehicles, on an annualized basis.
Sales were tracking about 17.4 million vehicles on an annualized basis, according to RBC Capital Markets.
GM's chief economist, G. Mustafa Mohatarem, and Ford's sales chief, Mark LaNeve, both said sales are still at healthy levels.
Mohatarem said sales for the year were 1 percent higher than they were at this time in 2015. "Let's calm down on the doomsday talk," he said at an industry conference in Traverse City, Michigan.
GM thinks there is potential for a new record for U.S. industry auto sales this year, Mohatarem said.
Nonetheless, GM shares shed 4.5 percent, Ford slid 4.2 percent and FCA dropped nearly 4 percent.
While Wall Street took a dim view of American automakers on Tuesday, sales of SUVs and pickup trucks, which are responsible for record or near-record earnings this year for GM and Ford, are expected to continue to rise.
Sean McAlinden, chief economist at the Center for Automotive Research, said on Tuesday the shift to SUVs and other light trucks could hit 70 percent within two years because of low gas prices and fuel rules. They are about 60 percent now. Passenger cars, such as sedans and hatchbacks, were at 50 percent of the U.S. market in 2010.
Citi analyst Itay Michaeli said sales volume should fall in August in part because of fewer weekends than in July. But he emphasized that as sales plateau, they still remain historically strong.
Japan-based automakers Honda Motor Co (T:7267) said sales were up 4.4 percent, and joined Toyota in reporting higher-than-expected July U.S. sales. Nissan Motor Co (T:7201) said sales rose 1 percent, including a 33 percent hike for its top-selling model, the Rogue small SUV.
FCA last week restated its monthly sales going back to 2011. It is under investigation by the U.S. Justice Department for its sales reporting practices.
Source Reuters
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