Detroit's Big 3 See Big Declines: July Auto Sales Roundup

U.S. vehicle sales continued to be lackluster in July, with the weakness more pronounced among the U.S. automakers. Coupled with sales worries, the industry is also plagued by higher inventory levels and unusually higher incentives for this time of the year.

The companies continued to chip away rental sales — a conscious decision as these are of low margins.

The moderation in sales was expected, coming off record performances both in 2015 and 2016.

The month had one less selling days in 2017 compared to July of 2016.

Edmunds.com had forecast July auto sales to experience the biggest drop for the year. The firm estimated total vehicle sales of 1,423,097 for July, down 3.1 percent month-over-month and 6.2 percent lower than a year ago.

"July is historically a strong month, but with disappointing sales and inventories still building, something needs to give," said Jessica Caldwell, Edmunds executive director of industry analysis.

"A lot is riding on late-summer sales events to help move vehicles before 2018 models start arriving at dealer lots."

Meanwhile, forecast by J.D. Power and LMC Automotive pointed to a decline in new retail sales pace for the fourth straight month in July. The firm estimated total sales of 1,236,000 for July, with the seasonally adjusted annual rate, or SAAR, estimated at 14.1 million units, down 600,000 units from last year.

Among the concerns raised by J.D. Power was higher incentives, atypical for the period following the July 4 Independence Day holiday.

GM Sales Skid

General Motors Company GM reported a 15-percent plunge in total sales to 226,107 vehicles. Retail sales, accounting for the bulk of sales, fell 14 percent to 202,330 vehicles.

The company termed the performance as being in line with the moderating sales trend in the U.S.

On a positive note, the company noted that crossovers and trucks accounted for 80 percent of sales, the best monthly mix ever. The company indicated that changing customer tastes have driven it to focus on the higher margin, faster growing categories such as the crossovers.

GM said incentives as a percent of the average transaction prices, or ATP, were 11.5 percent and the ATP was about $36,000, up from $1,000 from July 2016.

See also: GM Shares 46% Undervalued According To This Sum-Of-The-Parts Analysis

Ford Sings Same Tune

Crosstown rival Ford Motor Company F saw a 7.5 percent drop in total sales to 200,212 vehicles. Fleet sales, accounting for roughly 20 percent of the total sales, fell 26.4 percent, while retail sales dipped 1 percent.

Even amid the weakness, F-series truck sales, as well as SUV sales, rose for the month.

Down ... Down ... And Downhill For Fiat Chrysler

Fiat Chrysler Automobiles NV FCAU reported a 10-percent drop in total sales for July to 145,391 units. Retail sales, accounting for about 90 percent of the total sales, were down a more modest 6 percent.

Foreigners Fared Better

Japanese automaker Toyota Motor Corp (ADR) TM said its July sales rose 3.6 percent on a volume basis and were 7.8 percent higher on a daily selling rate basis.

"In July, Toyota division saw its strongest month of the year so far, and our second consecutive month of year-over-year increases based on sales volume," said Jack Hollis, group vice president and general manager.

Honda Motor Co Ltd (ADR) HMC reported that its July sales were down 1.2 percent to 150,980 vehicles, with the company blaming the drop on tight supplies.

Incidentally, car sales rose 1.9 percent, while truck sales were down 4.2 percent.

Nissan Motor Co Ltd (ADR) NSANY said its U.S. sales fell 3 percent to 128,295 units in July.

Outlook

"The second half of the year will continue to present challenges to manufacturers as they navigate a hyper competitive and dynamic marketplace, while working to find the optimal mix of production cuts and discounting necessary to align supply, demand and inventory levels," Thomas King, vice president of PIN OEM operations, media & marketing at J.D. Power said.

However, GM chief economist Mustafa Mohatarem sounded more optimistic, as he sees the second half of the year to be much stronger than the first half, given the current economic conditions that are supportive of strong vehicle sales.

At Time Of Writing

• GM shares were down 3.59 percent to $34.69.
• Ford was slipping 2.94 percent to $10.89.
• Fiat Chrysler was seen trading flat at $12.09.
• Toyota shares were advancing 1.18 percent to $114.17.
• Honda was rallying 2.36 percent to $28.68.
• Nissan was up a more modest 0.20 percent to $19.95.