July car sales were weaker than expected

Michael Martinez
The Detroit News

July’s weaker-than-expected sales for many automakers is the latest sign the industry has reached a plateau after a six-year streak.

Ford Motor Co. on Tuesday said its July sales fell 2.8 percent compared to the same month a year ago, while crosstown rival General Motors Co. said sales fell 1.9 percent. Fiat Chrysler Automobiles reported a slight gain of 0.3 percent.

There’s still pent-up demand. And the big-picture economic trends that drove the industry’s record growth in recent years — easy credit, high consumer confidence and a stable job market — are still in place. But some in the industry say that growth is reaching a natural end.

“We just think it’s a tougher environment,” Mark LaNeve, Ford vice president of U.S. marketing, sales and service, said. “My dad used to say, ‘Trees don’t grow to the sky.’”

And troubling trends are starting to emerge, including incentives rising faster than average selling prices.

“The industry’s six-year sales streak is clearly plateauing, though plateauing at a rate above 17 million annual sales isn’t the worst place to be,” Karl Brauer, senior analyst with Kelley Blue Book, said in a statement. “Trucks and SUVs have driven the lion’s share of growth in recent years, yet many of the market’s most popular models were flat last month, suggesting even the utility gravy train is slowing down.”

Ford executives on Tuesday blamed a GM sales promotion for sales drops of some of Ford’s popular nameplates, like the Escape and Explorer. Over all, KBB said incentives are up 12.5 percent through the first seven months of the year, and are rising faster than average transaction prices.

“The sky isn’t falling just yet, but we are on an unhealthy path,” said Alec Gutierrez, senior market analyst with KBB.

FCA, which recently switched its sales reporting practices, said it sold 180,727 vehicles compared to 180,124 the same period a year ago. It was driven by its Jeep and Ram brands, which rose 5 percent each. Chrysler sales fell 4 percent, Dodge sales fell 10 percent and Fiat sales fell 14 percent.

“This balance (or lack thereof) is unsustainable for FCA and will require some future activity and improvements from Chrysler and Dodge,” KBB analyst Mark Williams said.

Sales rose at all GM brands except for Chevrolet, which saw a 5.3 percent sales dip. GM’s brands collectively had their best July retail sales performance since 2007, the company said.

The Detroit automaker has been scaling back fleet sales to focus on retail sales. It estimated that GM’s retail market share rose 1 percentage point in July to 17.9 percent, its highest mark since December 2011.

“Our retail-focused plan is working and as availability of our new cars, trucks and crossovers continues to grow, we expect to keep our retail sales momentum going and our strong margins intact,” said Kurt McNeil, U.S. vice president of Sales Operations. “We are growing our retail business while keeping inventories lean, incentive spend disciplined and growing our transaction prices faster than the industry average.”

Sales at Buick rose 10.4 percent, driven by strong performances for the Regal, Enclave and Encore. Cadillac sales rose 1.3 percent, and GMC sales rose 4.8 percent.

GM ended July with a 66-day supply of vehicles.

Ford sold 216,479 total vehicles last month. Fleet sales to rental companies and government customers were up 6 percent, while retail sales fell 6 percent, Ford said.

Ford recorded its best July van sales since 1978, with 20,236 sold. Overall, Ford car sales fell 9.3 percent, SUV sales fell 5.6 percent and truck sales rose 4.8 percent, although sales of its popular F-Series fell 1 percent.

Sales of Ford’s Lincoln luxury brand fell 4.6 percent.

Ford said the industry is still healthy, but it’s no longer counting on the same level of industry growth it was expecting at the start of the year.

Nissan Group said its sales rose 1 percent to 132,475, American Honda Motor Co. said sales rose 4.4 percent, while Toyota Motor Corp. said sales fell 1.4 percent and Volkswagen AG sales fell 13.6 percent.

KBB lowered its full-year sales forecast to between 17.4 million to 17.8 million vehicles. At the low end, that would represent a small decline over last year’s banner numbers.

“The new-car market currently appears to be reaching its peak in terms of sales, and now there is a better chance that 2016 won’t be another record year, as year-over-year comparisons for the remainder of 2016 will be tough,” Tim Fleming, analyst for Kelley Blue Book, said in a statement.

MMartinez@detroitnews.com

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