February was harsh month for car sales
Sales of cars and trucks softened further in February as demand – even for pickups – slackened amid resistance by carmakers to raise incentives and as interest rates crept upward.
All three Detroit automakers reported declines in February auto sales compared to the same month a year ago.
General Motors Co. sold 220,740 vehicles in the U.S. in February, down 7 percent year-over-year, according to Autodata Corp. figures released Thursday. Ford Motor Co. reported sales of 193,362 vehicles, a 6.8 percent decline. Fiat Chrysler Automobiles sold 165,903 vehicles, a 1.4 percent decrease.
The declines were part of a slump across all makes, with overall sales down 2.4 percent to 1,302,128.
The decreasing auto sales come as Kelley Blue Book reported Thursday that the average sale price for a new car rose to $35,444 in February, up 2 percent from February 2017. Additionally, Edmunds reported that the annual percentage rate on new financed vehicles averaged 5.2 percent in February, up from 4.9 percent in 2017 and 4.4 percent five years ago.
Even full-size pickups, a reliable cash cow for Detroit carmakers, had a tough month. The Chevrolet Silverado was off 16.3 percent compared to a year ago, while the GMC Sierra was off 26.6 percent. The Ram 1500 was off 14.7 percent. Only Ford’s F-150 saw a gain, with a sales up 3.5 percent. New versions of the Silverado, Sierra and Ram are in the pipeline.
Mark LaNeve, Ford vice president, U.S. marketing, sales and service, said Ford and other automakers have responded to downward pricing pressure by showing “remarkable” discipline in offering incentives, nothing that overall incentive spending for the industry in February was down $65 on average per car from February 2017, in what is traditionally the second-lowest seasonal month of the year.
“It’s really noteworthy, almost remarkable by what we saw as continued strong industry pricing discipline,” he said in a conference call with analysts and investors. “Really we saw it in January, coming off December which is a big merchandising month. We saw that kind of discipline in January and it obviously carried over into February.”
Among international manufacturers, Toyota sales rose 4.5 percent, Volkswagen was up 8.4 percent and Mazda sales grew 12.7 percent.
Honda declined 5 percent, while Nissan was down 4.3 percent.
Jessica Caldwell, Edmunds’ executive director of industry analysis, expects auto sales to be sluggish for most of 2018.
“This year is going to be a bitter but necessary pill for the auto industry to swallow,” she said in a statement. “Automakers are slowing production of passenger cars to react to declining demand, and are also trying to find the right balance between keeping sales strong and becoming too dependent on costly incentives. The industry is still in a fairly healthy place, but it may not feel like it since the last few years have been in record territory.”
Caldwell added that auto loan interest rates are expected to continue to rise because the Federal Reserve has telegraphed it is likely to raise the interest rate that banks charge each other for loans at least two times this year — possibly four. She said those increases could trickle down to car buyers as carmakers find they can no longer subsidize ultra-low loan terms.
Michelle Krebs, executive analyst for Autotrader, said automakers are likely to face continuing headwinds next month.
“Market softness spread beyond cars in February to other segments of the market,” she said. “Trucks did not have a spectacular month, despite some hefty incentives, and utility performance varied by brand. Still, January and February are low sales months. March and April will truly indicate whether vehicle sales are ready to come out of hibernation.”