Auto Market Turns for Worse With Lowest Sales Rate in 18 Months
Fiat Chrysler deliveries drop for the first time in a year.
(Bloomberg) -- It’s been a cruel winter for auto sales, as slowing deliveries of even once-hot sport utility vehicles signal the rapid onset of a widely expected downturn in U.S. new-car demand.
Even Jeep, Fiat Chrysler Automobiles NV’s star SUV brand, suffered a second consecutive monthly decline, driving the carmaker to its first total sales retreat in a year. At Ford Motor Co., sales fell 4.4 percent, worse than analysts projected, due in part to a drop-off in sales of its top seller, the F-Series, according to a person familiar with the results.
Those companies joined Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. in trailing analysts’ estimates for February in a Bloomberg News survey. The annualized industry sales rate slowed to 16.6 million, the worst reading in 18 months, according to researcher Autodata Corp., also missing expectations.
Sales dropped 5.9 percent for Fiat Chrysler’s lucrative Jeep Wrangler, which entered February with inventory piling up at dealerships. The monthly results wiped out an early gain of as much as 1.7 percent, and the stock closed up 0.2 percent Friday in New York. General Motors Co. and Ford, which have switched to publicly reporting U.S. sales only on a quarterly basis, were also little changed.
Fiat Chrysler attributed the weak showing to literal and figurative headwinds at the outset of the year that were beyond the company’s control. “The overall industry is starting off slower due in part to weather, the U.S. government shutdown, and concern over tax refunds,” Reid Bigland, Fiat Chrysler’s head of U.S. sales, said in a statement.
Dialing Down Deals
Jeep’s rough patch after a yearlong growth spurt adds to signs the American SUV boom may have reached its limits. Rising interest rates and tighter credit are likely to make it more difficult to sustain a run-up in prices to record levels. That’s been fueled by consumers shift toward costlier pickups and other light trucks at the expense of sedans.
“Affordability is going to be a challenge for consumers going forward, and we’re beginning to see that,” Michelle Krebs, senior analyst for car-shopping researcher Autotrader, said by phone.
Despite slowing sales, most automakers are showing discount discipline. They’ve been dialing down the deals after year-end blowout sales such as a GM’s December promotion promising “employee pricing for everyone.” February incentives averaged $3,721 per vehicle, down $161 from the same month last year, researcher LMC Automotive estimated earlier this week.
“We’ve seen the average level of incentive spending pulled back from what it was at the end of last year,” said Brian Irwin, who leads the automotive practice at consultant Accenture. “Carmakers are pulling back now so they can be more bold when there are more people in the marketplace. It’s really about fishing when the fish are biting.”
‘Lower Gear’
The slump in sales of sedans has weighed heaviest on Asian brands, and February was no exception. Demand for Toyota’s Camry and Nissan’s Altima both declined by double digits from a year ago. But more surprisingly, the two saw sales swoon for the compact SUVs that are their best-selling vehicles in the U.S..
Toyota deliveries in February fell 5.2 percent, dragged down by weak demand for its RAV4. Sales fell 12.5 percent for the Japanese company’s compact SUV. Nissan’s Rogue crossover plunged 16 percent, pulling down the automaker’s overall monthly sales by 12 percent compared with a year ago.
Honda, whose sales slipped 0.4 percent on the month, reported that February deliveries for its Pilot midsize SUV fell 8.8 percent for a fourth straight decline.
After several years of U.S. sales at or near record levels topping 17 million vehicles, the National Automobile Dealers Association forecasts 16.8 million deliveries in 2019. That would be down from about 17.3 million last year.
“The results today suggest a much bigger story: The sales pace has finally shifted into a lower gear,” said Charlie Chesbrough, senior economist of Cox Automotive.
To contact the reporters on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net;Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson
©2019 Bloomberg L.P.