Ford, Toyota Sales Top Estimates in Big Month for SUVs

Strong sport-utility vehicle demand sent Ford Motor Co. (F)’s U.S. sales in July up 9.5 percent and Toyota Motor Corp. (7203)’s up 12 percent to exceed analyst estimates keeping deliveries headed toward the best year since 2006.

Ford’s said it sold 211,467 light vehicles last month as Escape SUV sales soared 19 percent to its best July ever. Chrysler’s deliveries jumped 20 percent as Jeep also recorded its best July on a 41 percent surge by the SUV brand. GM’s large SUVs powered a 9.4 percent increase. Toyota sales benefited from the RAV4 compact utility’s best month ever.

“The on-again, off-again relationship is back on and the love affair goes on,” Jeff Schuster, an analyst with LMC Automotive, said of surging SUV sales. “It shows that consumers are feeling good about the position of the economy. Combine that with some new products and relatively low fuel prices and the magic takes over.”

Light-vehicle sales rose 9 percent to 1.44 million, missing estimates for a total of 1.45 million, said Autodata Corp. The annualized rate, adjusted for seasonal trends, rose to 16.5 million from 15.8 million a year earlier, the researcher said in an e-mailed statement. Analysts had predicted a 16.7 million pace.

Widely available credit, low interest rates and a rebounding U.S. economy, marked by a 4 percent jump in gross domestic product in the second quarter, kept the annualized selling rate, adjusted for seasonal trends, above 16 million for the fifth straight month as buyers returned to dealer lots following the frigid winter.

‘Good Momentum’

“The U.S. economy left July carrying good momentum,” Kurt McNeil, GM U.S. vice president of sales operations, said in a statement. “The economy has bounced back strongly from the harsh winter, consumer confidence has reached a post-recession high, energy prices remain moderate and job growth continues. The stage is set for strong sales through the balance of the year.”

Analysts had estimated a 9.2 percent gain for Ford, a 23 percent jump for Chrysler, and 11 percent increases for GM and Toyota. Honda Motor Co. sales fell 3.9 percent, while analysts had predicted a 3.1 percent increase.

GM’s shares dropped 1.1 percent to $33.44 at the close in New York, while Ford fell 1.2 percent to $16.81 in a down day for the markets.

Hyundai Motor Co. and Kia Motors Corp., corporate affiliates that are also South Korea’s largest automakers, sold a combined 119,320 vehicles last month, up 3.8 percent from a year ago. That missed an expected 8.6 percent increase.

Individually, Hyundai boosted sales 1.5 percent and Seoul-based Kia reported a 6.7 percent increase.

Car Incentives

Even as Ford results topped estimates, John Felice, the automaker’s U.S. sales chief, said that industry growth is beginning to slow as the auto market nears a peak, which drove up industry incentives by $190 per vehicle. At the same time, average prices industrywide rose $800 per vehicle last month as car buyers shift to more costly SUVs.

“We’ve seen a very healthy industry this year, but the rate of growth has slowed,” Felice said on a conference call. “On the car side of the business, incentive spending there is aggressive.”

Sales of GM’s redesigned large SUVs surged. The Chevrolet Tahoe rose 52 percent, the GMC Yukon jumped 48 percent and Cadillac Escalade sales more than doubled.

“Sales of utility vehicles soared in July because American families feel better about the economy than they have in a long time, and they are finding an incredible variety of redesigned and all-new models,” McNeil said.

More Efficient

Better gas mileage on redesigned SUVs, such as the Ford Escape, is stealing sales from cars, Felice said.

“You’re seeing some customers who may have considered a car before to maximize fuel economy coming into the utility segment to take advantage of the improved fuel economy,” Felice said.

Chrysler, wholly owned by Fiat SpA (F), said its sales rose to 167,667, marking the third-largest U.S. automaker’s 52nd consecutive monthly increase. All five of its brands increased deliveries as the Auburn Hills, Michigan-based automaker posted its best July in nine years.

“With Chrysler, I think the estimates were just too high,” said Michelle Krebs, a senior analyst at AutoTrader.com. “This is another strong month for them.”

Fiat shareholders approved merging the parent company and the U.S. business into a new entity, Fiat Chrysler Automobiles NV at a special meeting in the Italian manufacturer’s hometown of Turin. The new company will switch its main stock listing to New York and its headquarters to London.

‘Pent-Up Demand’

Sales of the Chrysler brand’s Town & Country minivan jumped 41 percent for its best July since 2006, Ram pickup sales rose 14 percent and the Fiat brand’s 500L gained 49 percent.

Nissan reported an 11 percent advance in sales to 121,452 for the month that fell short of analysts’ projected 14 percent increase.

The improving economy and rising consumer optimism mean auto demand isn’t likely to see “any significant downturns” for the remainder of the year, said Fred Diaz, Nissan’s senior vice president for North American sales.

“The reason I say that is the pent-up demand and the age of the average vehicle on the road today is still over 11 years old,” Diaz said in a phone interview. “That’s going to keep us primed for moderate, steady or slow growth.”

SUV Strength

GM sales, helped by redesigned large SUVs, rose to 256,160 vehicles, the Detroit-based automaker said in an e-mailed statement. The company’s GMC truck brand rose 22 percent while the Buick and Chevrolet brands both increased almost 8 percent. Cadillac fell 2.6 percent.

Ford’s SUV sales jumped 17 percent, with its Explorer model up 32 percent to its best July since 2005. Ford also had a record month for sales of its Fusion sedan, which rose 17 percent to 23,942. Ford F-Series pickup sales gained 4.6 percent.

Revamped cars and trucks from Ford, GM and other automakers are luring buyers to dealerships in droves and prompting analysts, already bullish about the industry’s prospects, to issue even more optimistic projections. Analysts estimate deliveries of new cars and light trucks will rise to 16.3 million by the end of the year. The new estimate means this year would be the biggest for U.S. auto sales since 2006, when 16.6 million units were sold.

Available Credit

Automakers are benefiting from widely available credit and low interest rates, said Jessica Caldwell, an analyst with Edmunds.com. A change in buying habits is also making owning a new car more affordable over time with leasing and longer-term loans attracting buyers, she said.

“Even though cars are more expensive now, people are leasing now more than we’ve seen in a long time and loan rates are averaging out around 5 years,” said Caldwell, who forecasts sales this year of 16.4 million vehicles. “When you’re leasing or you’re spreading payments out over six or seven years as opposed to three or four, all of a sudden that car doesn’t appear to be as expensive.”

The automakers are in a much stronger position than the last time sales were this robust, Caldwell said.

In 2006, U.S. automakers GM, Chrysler and Ford were facing increased competition from Asian manufacturers, higher labor costs and rising gasoline prices that dinged sales of pickups and sport-utility vehicles, their most profitable models.

To contact the reporters on this story: John Irwin in Southfield, Michigan, at jirwin25@bloomberg.net; Keith Naughton in Southfield, Michigan, at knaughton3@bloomberg.net; Tim Higgins in Southfield, Michigan, at thiggins21@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net Niamh Ring

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