Detroit Lags Behind Japan Rivals in Diverging U.S. Auto Market
(Bloomberg) -- Automakers began the year with a stark Detroit-versus-Japan divide.
General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV all posted U.S. sales that fell short of analysts’ estimates for last month, as demand plunged for domestic sedans including the Chevrolet Cruze and Ford Fusion. Toyota Motor Corp. and Nissan Motor Co., meanwhile, boosted deliveries thanks to RAV4 and Rogue crossover models.
The Detroit Three are coming off the first annual sales drop in their home market since the recession and are having a harder time coping with consumers abandoning passenger cars. Some automakers also may have endured a bit of a hangover -- the industry ended 2017 with its best showings of the year, thanks in part to heavy discounting.
“This is a bumpier start to the year than we expected,” Jeff Schuster, an analyst with LMC Automotive, said by phone. “Payback plays a role here after the robust fourth quarter of last year and the heightened level of incentives.”
For Fiat Chrysler, which posted the biggest decline among U.S. automakers, sales have declined for 17 consecutive months. The company has been curtailing discounted shipments to fleet customers including rental-car companies and halved those deliveries in January compared with a year earlier. The Jeep SUV brand logged record January sales to retail buyers.
Toyota’s 17 percent surge in total sales matched the highest projection in a wide range of estimates. Deliveries climbed 21 percent for Toyota’s revamped Camry sedan and 20 percent for the RAV4, the industry’s top-selling SUV last year.
Nissan’s sales of the runner-up crossover, the Rogue, increased 26 percent and the Altima sedan increased 6.66 percent.
Fiat Chrysler Chief Executive Officer Sergio Marchionne also has re-engineered car plants to produce more profitable pickups and sport utility vehicles instead. The automaker began shipping the new Jeep Wrangler SUV to dealers and debuted the redesigned Ram 1500 truck at the North American International Auto Show in January. Ram pickup sales fell 13 percent last month, before the redesigned model starts production.
Ford said last month it plans to adopt a playbook similar to Marchionne’s: dump slow-moving sedans in favor of SUVs. But the company’s crossovers had a rough January, with deliveries dropping for models including the Escape, Edge and Explorer. The company says that will change as dealer inventory grows of new EcoSport and redesigned Expedition SUVs.
“As we move through the year, we will perform better in all SUV segments,” Mark LaNeve, Ford’s U.S. sales chief, said on a conference call. “With Edge and Escape, we lowered incentives much more than the industry did in those segments. We’ll be updating Edge later this year and Escape not too far off in the future.”
The industry’s monthly annualized sales pace slowed to 17.1 million cars and light trucks, matching the average estimate in a Bloomberg News survey. The figure, which is adjusted for seasonal trends, dropped from 17.4 million a year ago, Autodata Corp. said. The last four months of 2017 were the best rates of the year.
Fiat Chrysler slid as much as 2.3 percent, while Ford shares fell as much as 1.1 percent. GM, which eked out a sales gain for the month, dropped 0.3 percent to $42.29 as of 3:45 p.m. in New York.
To be sure, January wasn’t a slam dunk for the Japanese automakers. Honda Motor Co. reported a surprise decline. And Barclays Plc analysts who predicted the big jump for Toyota said in an email that the company boosted sales to fleets during the month.
About 29 percent of Nissan’s U.S. deliveries were to fleet customers -- including its own dealers -- during the first 11 months of last year, according to Autotrader.
“It is safe to assume that Nissan will still rely heavily on rental sales to start 2018 to gain market share,” said Zohaib Rahim, an analyst for the car-shopping website.
The auto market has been supported by stable fuel prices, available credit and low unemployment. While the tax bill signed by President Donald Trump probably will be a tailwind in 2018, most carmakers and analysts still project that annual industry sales will decline for a second consecutive year.
And there’s a downside to automakers having managed to keep sales more or less steady: use of heavy discounts.
“In the face of very high consumer confidence, low interest rates, low gas prices, longer and longer loan terms, we’re still seeing the pedal through the floorboards on incentives,” said Mark Wakefield, head of the auto practice at consultant AlixPartners. “You’re training consumers to look for the deal.”
©2018 Bloomberg L.P.