Auto Sales Slow as U.S. Eases From Peak to ‘Pretty Good’ Market

  • GM, Toyota, Fiat Chrysler decline; Ford’s report is delayed
  • October sales fall 4.4% from industry’s top month in 2015

U.S. Auto Sales Slowed in October

Automakers reported lower U.S. sales for October, reinforcing the idea the market may have plateaued at a healthy level that still supports the U.S. economy.

The companies faced a difficult comparison to the year-earlier month, which was the best of 2015 and had two more sales days. Sales fell 4.4 percent to 1.39 million vehicles in October, Autodata Corp. reported on its website, after including an estimate for Ford Motor Co.’s results expected later this week. The largest automakers, including General Motors Co., Toyota Motor Corp. and Fiat Chrysler Automobiles NV, all declined.

October’s results help explain why investors have lost enthusiasm for automakers’ shares, even with the possibility still in play that 2016 could mark a record seventh straight year of sales gains. While pickup and sport utility vehicle demand remains strong enough to keep the companies making money, it will be hard for most to wring out better earnings.

“It’s getting tougher to sell cars, but it’s still a pretty good market,” Michelle Krebs, an analyst with Cox Automotive’s Autotrader, said in an interview. “It’s just taking more money to push the sales.”

Not all the news was bad. GM topped the average estimate in a Bloomberg survey of 11 analysts, dropping just 1.7 percent instead of the 6.9 percent predicted.

Ford’s missing sales report, delayed because of a fire this week at the company’s headquarters, produced some discrepancy in calculations of October’s seasonally adjusted annualized sales rate. Autodata pegged the SAAR at 18.3 million vehicles, the highest since before the recession and bankruptcies of GM and Chrysler, while Wards Automotive Group estimated 17.9 million.

The difference comes down to the research groups’ estimates for Ford. An analysis on Autodata’s website estimates that Ford sales decreased 2.3 percent, which would be far better than any analyst’s prediction. The Ford average in the Bloomberg survey was for an 11 percent plunge, and the most optimistic was for a 9 percent drop. Wards in its SAAR estimate projects a 12 percent drop for Ford. The year-earlier rate was 18.2 million vehicles, and the average estimate in the survey was 17.7 million.

Shares of GM, Ford and Fiat Chrysler all fell 1.1 percent or less.

Added Incentives

Automakers are dialing up the deals as the market slows. Sales gains by GM’s large SUVs were aided by higher incentives, Krebs said. GM also added “hefty rebates” on its Silverado pickup to win back sales it lost in September to Fiat Chrysler’s Ram, said Brad Korner, general manager of AIS Rebates.

“Incentives have increased dramatically across the board, and in particular in those segments that are under severe pressure,” Joe Eberhardt, who runs Jaguar Land Rover North America operations for Tata Motors Ltd., said in an interview last week. “In the luxury segment, that’s cars and sports cars.”

Low fuel prices have propelled sales of trucks and SUVs, which accounted for almost 60 percent of U.S. sales this year through September. Those favorable prices are threatened by a fatal explosion in Alabama that shut the largest fuel pipeline in the U.S., sending gasoline in New York soaring the most in nearly eight years.

Ford Delay

Today’s results won’t be the final word on October. The delay in Ford’s report was because a Monday fire at its headquarters disrupted the flow of information from dealers, the No. 2 U.S. automaker said in a statement. Ford’s sales will be for a month in which it stopped an incentive program for dealers and pared production at five assembly plants.

After cutting production 12 percent in the third quarter, Ford is curtailing factory output by 12.5 percent in this year’s last three months to reduce inventories of unsold cars, such as the compact Focus and midsize Fusion. The automaker also has scheduled downtime at plants building the F-150 pickup and Mustang sports car.

Sales Results

Toyota missed estimates with an 8.7 percent drop, far exceeding the 4.7 percent decline that analysts predicted, with demand for the Prius gas-electric hybrid falling by almost half. Fiat Chrysler sales fell 10 percent, compared with a 9.8 percent drop predicted in the survey, in part on a rare decline for Jeep SUVs. Nissan slipped 2.2 percent instead of the estimated 1.5 percent.

The only gain among the largest companies came from the combined sales by Korean affiliates Hyundai Motor Co. and Kia Motors Corp., where sales rose 1.3 percent instead of the estimated 4.8 percent drop.

Though incentives and low-margin fleet sales are rising, automakers are showing more restraint than in the beginning of past downturns, when they engaged in fire sales to keep the factories running, said Mark Wakefield, managing director and head of the automotive practice for consultant AlixPartners.

"I’m hearing talk of, ’Next year would be a good year if we held flat,’ which is healthy," Wakefield said. "A decade ago, the talk was always about ‘More, more, how can we drive more?’"

— With assistance by John Lippert

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