- Ford, Fiat Chrysler exceed estimates as rate hits 17.5 million
- GM falls short of consensus as it pulls back on rental fleets
Ford Motor Co., Fiat Chrysler Automobiles NV and Honda Motor Co. led automakers as the U.S. posted the best February sales since 2000, with buyers taking advantage of cheap gasoline, low interest rates and Presidents Day deals.
The results bolstered prospects that the U.S. could see another record year for vehicle sales, a bright spot in an economy that has slowed of late. While General Motors Co. posted an unexpected decline, its shares rose as investors rewarded its strategy of selling fewer low-priced, low-profit vehicles into rental fleets.
Sales rose 6.9 percent to 1.34 million light vehicles and February’s annualized selling rate was 17.5 million, up 1.1 million from a year earlier, researcher Autodata said. The pace shows that the U.S. economy has some underlying strength as job growth, low interest rates and a large base of older cars on the road keep buyers streaming into dealerships. Investors have been less sanguine, giving auto stocks a rough start to the year on suspicion that car sales might have peaked in 2015 or will do so this year.
“The American consumer is feeling confident and enthusiastic about buying new vehicles, especially sport utilities and trucks,” said Michelle Krebs, an analyst for AutoTrader.com. “We know it’s got to peak at some point and we will have a dip, but we don’t think it’s this year and we expect next year to be strong.”
While sales were lifted by some aggressive deals offered during the Presidents Day holiday, there was organic demand as well. The average vehicle on the road is more than 11 years old and and 3.1 million are coming out of their leases this year-- about 500,000 more than last year -- according to Manheim, the nation’s largest wholesaler of cars for dealers. Cheap fuel also helped: The U.S. average gasoline price Monday was $1.76 a gallon, only about half the $3.45 of two years earlier, according to AAA.
Not everyone enjoyed the party. GM sales fell 1.5 percent, missing the average estimate for a 5.1 percent gain. The automaker cut back deliveries to rental agencies by 39 percent, while retail sales rose 7 percent. Putting fewer cars into rental fleet is intended to improve profitability, said Kurt McNeil, its vice president of U.S. sales.
Ford is taking a diverging path. U.S. sales chief Mark LaNeve said that putting models in rental fleets is “very good business” because it exposes travelers to the company’s products. Ford may be finding an outlet for slow sellers like the Focus compact, which had a 33 percent gain last month.
GM has “the benefit of new models like the Malibu and Cruze,” said Eric Lyman, vice president of industry insights at researcher TrueCar Inc. “Ford doesn’t have that luxury. Their sedans are lining up as a bit older.”
GM’s shares rose 1.9 percent to close at $30.01 in New York. Ford gained 4.6 percent and Fiat Chrysler jumped 7.2 percent.
In part because of GM’s miss and lower than estimated sales at Toyota Motor Corp., the month’s annual sales rate was just shy of the predicted 17.6 million vehicles. Among the results for major automakers:
- Ford, projected to report a 13 percent increase for the month, topped that in all three categories: cars, SUVs and pickups. Its overall increase was 20 percent.
- Fiat Chrysler sales increased 12 percent instead of the 9.2 percent gain projected, extending its U.S. streak to 71 months. Jeep deliveries advanced 23 percent.
- Toyota’s 4.1 percent increase was a bit shy of the forecast of a 4.9 percent gain.
- Nissan Motor Co. rose 11 percent, beating estimates of a 7.2 percent gain.
- Honda sales jumped about 13 percent, ahead of the 8.8 percent estimate.
- Sales for Volkswagen AG’s namesake and Audi brands fell 8.4 percent, a bigger decline than predicted. The VW brand slid 13 percent, the fourth straight monthly drop, as the German automaker struggles to attract customers after the diesel-emissions cheating scandal that became public in September.
There was some deal-making to help spur sales, with Ford saying its incentives jumped $530 compared with last February. Goldman Sachs estimates incentives industrywide were up $175 a vehicle in February, according to a note from analyst Patrick Archambault.
To keep sales rolling, automakers are increasingly relying on subprime lending, especially on slow-selling cars, said Mark Wakefield, managing director and head of the automotive practice at consultant AlixPartners.
“Subprime is starting to get into rarer air,” he said. “There doesn’t seem to be much restraint.”
The increase in deals marks the quiet rise of the Presidents Day long weekend as a major automotive selling event.
“The Presidents Day sale really kicked the month into high gear,” said Beau Boeckmann, president of Galpin Motors, whose Ford store near Los Angeles had it best February in 13 years. “In this day and age, people expect a deal. And the Presidents Day sale gave them the excuse.”