SUVs save the day again as total US car demand softens

Bloomberg

June US sales show automakers are still selling lots of expensive trucks and sport utility vehicles, a bright spot that’s rescuing profitability in a market forecast to decline from last year’s record sales.
Deliveries of Toyota Motor Corp.’s RAV4 spiked 25 percent, while Honda Motor Co.’s HR-V saw a 35 percent gain, according to Autodata Corp. Toyota, Honda and Nissan Motor Co. shares rose in Tokyo trading after the US auto industry closed out the first half with more evidence there can be a profitable vehicle mix even as total sales ebb from 2016.
“The market is holding up very well,” said Michelle Krebs, senior analyst at Autotrader, an auto-pricing website. “We expected this kind of decline last year and we got an extra year of growth, so it’s pretty strong overall.”
Most major automakers reported better sales than analysts had estimated for June following a five-month streak of industry declines, with demand for roomier SUVs and pickup trucks doing most of the heavy lifting. Low unemployment, rising consumer confidence and an unexpected boost in orders at American factories all say that the economy is strong enough to keep car sales moving at a robust pace, even though it has softened from last year.
Industrywide sales fell 3 percent in June and the month’s annualized selling rate slipped to 16.5 million vehicles from 16.8 million a year earlier, Autodata figures show.
Toyota deliveries climbed 2.1 percent in June, while Honda sales rose 0.8 percent from the same month last year, both surpassing analyst estimates. Nissan Motor Co., which had been expected to record a drop, saw sales rise 2 percent instead.
“We’re pretty optimistic turning the corner into the second half,” Bill Fay, the head of Toyota-brand sales in the US, said. The automaker is sticking to its industry forecast of 17.1 million sales this year.
General Motors Co. and Ford Motor Co. shares rose Monday in New York trading. Shares of Hyundai Motor Co., whose US sales dropped a greater-than-expected 15 percent, fell 3.1 percent as of 9:49 a.m. in Seoul trading.
Collapsing demand for sedans and coupes by American consumers and rental-car companies have produced small declines in US sales volumes every month this year, and while second-half promotions are unlikely to reverse what looks like a permanent shift, the industry is still outperforming estimates. Among the six top sellers in the US, only GM missed analysts’ predictions.
Sales at Ford slipped 5 percent, but even that was less than the drop analysts had been estimating. A 14 percent slide in sales to fleet customers drove Ford’s decline. Sedan sales at Ford plunged almost a quarter, while deliveries of Ford’s biggest money maker, the F-Series truck line, rose 9.8 percent.

DRAMATIC SHIFT
“That dramatic shift into SUVs and trucks, which transact at a higher level generally, is not overcoming the overall weakness in cars,” Mark LaNeve, Ford’s US sales chief, told analysts and reporters on a conference call. “That trend is being played out across the industry.”
GM sales dropped 4.7 percent, more than analysts forecast, as it curtailed fleet sales. Its truck-focused GMC brand reported a 3.6 percent drop and passengers cars like the Chevrolet Malibu family sedan and Cruze compact fell by more than 30 percent. Still, average transaction prices rose about $400 each as it sold more big vehicles, GM said.
Fiat Chrysler Automobiles NV, which had been expected to report the biggest sales drop at 7.9 percent, narrowly beat estimates with a 7.4 percent slide.
Among the biggest automakers, only Toyota and Honda had been expected to report increases in June deliveries. Volkswagen AG, the world’s biggest automaker but still a smaller player in the US, saw its combined VW and Audi brand sales rise with the addition of the VW Atlas SUV that is made in Chattanooga, Tennessee.
Optimism about second-half demand is already gaining credence with strong showroom traffic, said Judy Wheeler, Nissan brand’s head of US sales. Feedback from regional vice presidents indicates that shoppers who were holding out for Fourth of July deals are showing up in stores this month. “Our stores have been busy,” she said.