Years-long auto sales streak loses momentum

Michael Martinez
The Detroit News

The automotive industry’s post-recession joy ride appears to have finally run out of gas.

Gains with its Lincoln brand eased Ford’s sales decline. The industry slowdown suggests the post-Recession run is starting to plateau.

Carmakers sold 1.51 million new cars and trucks in August, down 4.1 percent compared with the same month a year ago, according to Autodata Corp. Most major automakers — including Detroit’s Big Three — reported sales dips, as the annual selling rate hit 17 million, compared with 17.9 million a year ago, Autodata said.

While positive economic factors such as easy credit, high consumer confidence and strong selling prices remain, the pent-up demand coming out of the economic downturn of 2008-09 is starting to fade, leading to a slowdown and plateau in what has been white-hot sales growth. Analysts say the challenge for automakers now is to manage the post-peak cycle, and whether or not they turn to incentives to move cars off the lot at the same rapid pace of recent years.

“After several years of strong gains, growth is stabilizing,” said Stephanie Brinley, senior analyst with research firm IHS Markit.

“What is important to read out of the August results is that the industry is largely disciplined on incentives and production,” Brinley added. “Though incentives will play a more significant role for some specific models and segments as is typically true, average transaction prices are also reported to be coming up, reducing the net impact of incentives increases.”

Ford Motor Co. said it remained disciplined by not offering deals on slow-selling cars, which led to a 25.4 percent drop in that segment. Ford said a rise in car incentives would hurt its strong SUV business, which also was down, by 0.8 percent, thanks to a cutback in fleet sales for popular models such as the Escape and Explorer.

“Most August results relate to fleet timing,” said Mark LaNeve, Ford’s head of marketing, sales and service. “We’re not at all unhappy with our ... SUV performance.”

Ford’s sales were driven by its Lincoln luxury brand and van sales. Lincoln sales rose 7 percent compared with the same month a year ago, and van sales were up 13 percent.

GM is scaling back its fleet sales, which helped contribute to its 5.2 percent sales slide.

Cadillac was the only GM brand to post a gain, but the automaker said its overall retail sales are up 1 percent through the first eight months of the year.

“Despite tighter dealer inventories, we had a solid retail performance in August led by Chevrolet, which gained retail share in eight different segments,” said Kurt McNeil, U.S. vice president of sales operations.

McNeil added that he was satisfied with GM’s average transaction price, or ATP, of $36,730 per vehicle.

“Our retail strength is reflected in our record ATPs in August, which were up more than $1,600 from last month and nearly $5,800 above the industry average, while our incentive spending was below the industry average and well below our domestic competitors,” he said.

GM expects the annual selling rate will reach 17.3 million vehicles, slightly below last year’s record-setting numbers.

“All the economic factors continue to point toward a strong second half of the year and another potential record year for the industry,” said Mustafa Mohatarem, GM’s chief economist, said in a statement. “We think the industry is well positioned for a sustainable high level of customer demand.”

Experts remain split on whether the industry will set a sales record for a second consecutive year. and TrueCar still forecasts that the industry will top last year’s 17.47 million vehicles sold, while KBB’s full-year forecast calls for sales in the range of 17.4 to 17.8 million.

“Certainly, it does seem less likely,” said Tim Fleming, Kelley Blue Book analyst. “I kind of see that as a good thing for the overall health of these brands, the residual values. It’s unnatural to hit a record year after year.”

Autotrader senior analyst Michelle Krebs said the rest of the year could be the biggest test since the recession of whether automakers cans remain disciplined and not increase incentives to unhealthy levels to move cars off lots.

“If they do go for that record, and we see this often in different segments, it causes automakers to do unhealthy things,” she said, calling the rest of the year a “wild card.”

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Twitter: @MikeMartinez_DN

Michael Wayland contributed.