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U.S. sales drop again, yet SAAR remains strong

June U.S. sales at Hyundai and Fiat Chrysler rose, while Ford, Honda, Nissan, Toyota and General Motors fell as the industry recorded its sixth straight monthly decline.

Hyundai stretched its streak of winning months to 11 with a 1.5 percent increase. FCA, boosted single-handedly by Ram trucks, inched up 1.9 percent.  Subaru, Kia, Mitsubishi and Volkswagen were other winners among smaller brands. Toyota, which ended a six- month skid in May, was back in the deficit column with a 3.5 percent decline.

Total U.S. light-vehicle sales dropped 2.6 percent from a year earlier, marking the third time in the past decade that sales in each of the first six months of the year failed to top year-earlier totals.

Still, the seasonally adjusted annual sales rate hit 17.29 million, topping the 17 million mark for the third time in four months.  At the start of the year, most analysts were projecting sales for the year to come in below that level after four years above, including a 2016 record.  

There were 26 selling days last month, one fewer than June 2018, when the industry racked up one of its biggest gains of the year.

“Auto demand was better than anticipated in the first half and we expect strong performance in the second half of the year,” said GM Chief Economist Elaine Buckberg.  “If the Fed cuts rates, as widely expected, lower financing costs will provide further support to auto sales.”

Company results

Ford Motor Co. is still searching for its first winning month since January after recording a 4.7 percent June decline.  The Ford brand was off 4.6 percent, despite a small gain by the F-series pickup, the industry’s best-selling vehicle.  Lincoln slid 8 percent.

GM’s June sales dropped an estimated 0.9 percent. Demand fell 5.9 percent at Chevrolet but rose 18 percent at Buick, 8.2 percent at Cadillac and 8 percent at GMC, the Automotive News Data Center estimates. For the year, GM's U.S. sales are off 4.3 percent.

FCA was lifted by a 45 percent surge at the Ram brand. Ram pickup deliveries jumped 56 percent to just over 68,000, enough to help the truck outsell Chevrolet's Silverado and solidify its standing as the No. 2 large pickup in the first half of the year.

Volume dropped 12 percent at Jeep, 4 percent at Chrysler, 17 percent at Dodge, 35 percent at Fiat and 29 percent at Alfa Romeo. Jeep, one of the hottest brands last year with a U.S. sales gain of 18 percent, has seen deliveries fall every month this year.

FCA said fleet sales totaled 49,495 last month and represented 24 percent of total volume.  

Toyota's June sales dropped 3.5 percent, with volume down 3.5 percent at Toyota and 3 percent at Lexus. At Nissan, deliveries skidded 15 percent behind a 15 percent drop at the Nissan brand and an 8 percent slide at Infiniti.

Honda Motor Co. sales dropped 7.3 percent, with volume down 6.3 percent at Honda and 16 percent at Acura.

Hyundai's 1.5 percent increase came on higher retail sales and strong crossover demand. Hyundai said three CUVs – the Santa Fe, Tucson and Kona -- posted double digit gains in retail volume.

June marked the sales debut of the Palisade, Hyundai's large three-row crossover, and volume totaled 383 units. Overall, Hyundai's light truck sales rose 10 percent last month.

Among other automakers, volume rose 0.4 percent at Kia and 9.6 percent at the Volkswagen brand, but dropped 15 percent at Mazda.

Most other luxury brands posted gains last month, with volume up 0.7 percent at Mercedes, 7.5 percent at BMW, 0.7 percent at Volvo, 6.4 percent at Porsche and 137 percent at Hyundai's Genesis. Sales dropped 0.3 percent at Audi, 20 percent at Jaguar and 5.6 percent at Land Rover.

Second-half outlook 

Sales are now down 2.4 percent through the first six months. Some analysts see a second-half bounce from the launch of new and redesigned light trucks, as well as a possible interest rate cut from the Federal Reserve.

Strong consumer confidence, steady economic growth and employment gains, and relatively low gasoline prices continue to support new light-vehicle demand though affordability is increasingly weighing on the market, analysts say.

Automakers are also getting a boost from higher commercial and rental agency business. J.D. Power and LMC expected fleet sales to rise 3.9 percent in June, and Cox Automotive says fleet deliveries are on track to set an annual record in 2019.

Incentives

Automakers remain disciplined on discounts, with first-half incentives averaging $3,788 per unit, down $130 from the first six months of 2018, J.D. Power said. The average first-half discount on new cars fell $304 to $3,588, while average spiffs on light trucks dropped $65 to $3,871. In June, average incentives fell 1 percent, or $37, to $3,747 compared to June 2018, ALG estimates, but rose 0.4 percent, or $16, from May 2019. The Detroit 3 continue to offer the highest discounts among major automakers, though Honda and Toyota raised incentives, ALG data show. (See chart below.)

Odds, ends

Days to turn, the average number of days a new vehicle sits on a dealer lot before being sold to a retail customer, was 75 days through June 23, up 6 days from June 2018, J.D. Power said. The average new-vehicle retail transaction price in June was tracking at $33,665, up from $32,074 in June 2018, J.D. Power said. ALG estimates the average transaction price rose 3.1 percent, or $1,014, to $34,036 in June. Incentives, as a percentage of average transaction price, are expected to be 11 percent, down 3.9 percent from a year ago and up 0.6 percent from May 2019, ALG said. The Detroit 3 were not shy with cash incentives on big pickup trucks in June. Brad Korner, general manager of rebates and incentives for Cox Automotive, said Ram led the way with an average guaranteed cash incentive of $4,198 last month; followed by Chevrolet, $3,377 on the Silverado, and Ford, with $2,412 on the F series. The average interest rate on a new-vehicle loan dropped in June for the second month in a row, hitting its lowest level so far this year. Edmunds said the annual percentage rate on new financed vehicles averaged 6 percent in June, compared to 6.1 percent in May. And more shoppers received interest rates between 2 to 5 percent in June compared to any other month so far in 2019, Edmunds said.

Quotable

"The positive effects of tax cuts will be less pronounced this year. Job gains seem to be slowing in the late stages of what is now the longest period of expansion on record. And there’s uncertainty surrounding the implementation of tariffs on imported autos and auto parts, which if implemented later this year will cause new vehicle prices to rise and sales to fall."

     -- Patrick Manzi, senior economist for the National Automobile Dealers Association

“Despite all of the external noise, the beat goes on! A much more dovish Fed is under pressure and is now expected to make a series of interest rate cuts. This will provide support for auto sales in the second half of the year and help offset rising vehicle prices and the current level of incentives.”

    -- Jeff Schuster, head of global vehicle forecasts for LMC Automotive

““Transaction price growth accelerated in June, climbing 3 percent as demand for trucks and SUVs pushed sales and prices up in those segments. Overall, SUV prices were up 4 percent, and trucks rose 3 percent, while car prices were flat (and still lost market share). Luxury and mainstream midsize SUVs are showing the most strength right now, with brand new models such as the BMW X7 and Kia Telluride driving incremental sales and price growth for their brands.”

     -- Kelley Blue Book analyst Tim Fleming

“The summer selldown is officially in full swing, and car shoppers are finally starting to find the price breaks they’ve been hoping for. While we’re not talking about the dramatic discounts you could find just a few years ago, it’s clear automakers are realizing if they want to sell new cars at record-high prices, they’re going to have to do something to entice the average consumer.”

       -- Jessica Caldwell, executive director of industry analysis at Edmunds

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