The U.S. auto industry reported weaker-than-expected numbers in April. This weakness in sales for the second consecutive month diminishes the industry’s chances of recording three successive record sales years. On the whole, the U.S. auto industry registered a 4.7% sales decline to 1.43 million vehicles.
The seasonally adjusted annual sales level stands at 17 million units for April. Not only are sales dropping, but the rising inventory problem also remains an area of concern despite discounts. Jessica Cardwell, the executive director of Edmunds.com, said, "Inventory buildup is a top concern of automakers and all eyes are on whether cuts in production are enough to offset expected dips in sales."
Here’s a look at the automakers' performance in April.
The Detroit three
The top U.S. automaker General Motors (GM, Financial) witnessed a 6% drop in sales, selling 244,406 units in April. Sales of Buick and Cadillac surged 17% and 9.5%, but General Motors was not able to compensate for the loss the automaker suffered with the Chevrolet brand (down 10.4%) and GMC (down 0.3%). In contrast, crossovers and trucks look to be on a roll as these categories are seeing strong demand and continuous growth in sales volume.
Source: www.goodcarbadcar.net
The second-largest U.S. automaker, Ford Motor (F, Financial), reported April sales plunge of 7.1% to 213,436 units. While the total car sales decreased 21.2%, sales of SUVs climbed 1.2% as consumers prefer crossovers and SUVs over passenger cars. Furthermore, F-Series pickup trucks witnessed a modest drop of 0.2% in sales to 70,657 vehicles. Ford brand sales fell 7.5%. Lincoln brand sales also recorded a marginal drop of 0.9%.
Source: www.goodcarbadcar.net
Fiat Chrysler Automobiles (FCAM, Financial)(FCAU, Financial)(MIL:FCA, Financial)(FRA:2FI, Financial)(MEX:FCAN) said that its sales tumbled 6.9% to 172,960 vehicles. Retail and Fleet sales plunged 3% and 21% respectively. The sales decline is attributable to the soft sales of Chrysler, Jeep, Dodge and Fiat with sales decrease of 3%, 17%, 3% and 18%. Thus, sales of all brands remained low for the month except for Ram trucks, which witnessed a 5% improvement in volumes.
Performance of other automakers
The world’s top automaker Toyota (TM, Financial) reported a 4.5% sales decline year over year. The Lexus luxury brand registered a sales slump of 11.1%. RAV4 and small SUVs did witness impressive sales, yet poor performance and declining demand for cars such as Camry and Corolla let the automaker down.
Nissan (NSANY, Financial) sales were down 1.5%. The combined sales of SUVs, crossovers and trucks climbed 11%, but it was not strong enough to offset a decline in car sales. Honda (HMC, Financial) sales, too, were down 7% on a year-over-year basis.
Last word
The U.S. auto industry seems to have started stagnating after witnessing a fourth successive months of sales drops. Industry experts predict 2017 will be the first year since 2009 that may face a sales decline. Cardwell commented: "Considering that we have had seven years of growth, industry sales had to come down at some point,”
Though the demand for trucks and SUVs remains resilient, it must be noted that the average price paid per vehicle, including SUVs, is dwindling. The average transaction price is expected to drop further as automakers are relying on deep discounts and incentives to revive the shrinking market. While higher incentive is great news for customers, it is certainly not very profitable for automakers as the strategy would hit the bottom line.
Disclosure: I do not hold any position in the stocks mentioned in this article.
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