U.S. Auto Sales Slipped in First Half of 2019 as
Prices Climbed. Shift away from sedans and compact
cars helped dent sales volumes, by Nora Naughton, 7/2/19, WSJ
Major auto makers saw U.S. new-vehicle
sales drop in the first half, a decline expected to extend for the remainder of
the year as the U.S. auto industry’s historic sales run tapers off.
Rising car prices and higher interest
rates dulled demand in the year’s first six months, with many buyers flocking
to the used-car lot looking for deals. A dramatic shift away from sedans and
compact cars helped dent sales volumes in the first part of the year as General
Motors Co.GM -1.22% and other auto makers discontinued these
models.
U.S. new-vehicle sales this year are
likely to fall short of the 17 million mark for the first time since 2014,
analysts predict. A protracted run of strong sales following the financial
crisis has satisfied pent-up demand, they say.
Slowing
Sales U.S. auto demand cooled in the first half with analysts predicting
new-vehicle sales will drop below 17 million in 2019.
U.S.
annual vehicle sales grew from 10.43 million in 2009 to 17.55 million in 2016.
“We’re just past the peak,” said
Michelle Krebs, an automotive analyst at Cox Automotive. “Auto sales have been
edging downward, but it’s nothing catastrophic.”
The research firm J.D. Power estimates
the annualized selling pace in June to come in at 17.3 million, lower than a
year earlier.
The U.S. auto industry in the first half
has posted six straight months of weaker sales compared with the same period in
2018, according to Cox Automotive.
GM’s U.S. sales slid 4% through June,
while Fiat Chrysler Automobiles NV reported a 2% decline in the first six months.
Among the Japanese car companies, Toyota
Motor Corp. was off 3% in the first
half, Nissan was down 8.2% and Honda Motor Co. HMC -0.99% ’s U.S. sales fell 1.4%.
Ford
Motor Co. F -1.15% is the only major auto maker that will
report quarterly sales on Wednesday.
As the pace of sales slows, auto makers
are wrestling with keeping discounts in check, while also confronting rising
inventory levels and sticker prices that are stretching buyers’ wallets.
The average new vehicle sold for about
$33,350 in the first six months, a record for the period and up nearly 4% from
a year earlier, according to an estimate from J.D. Power.
Prices are rising partly because U.S.
buyers continue to gravitate toward sport-utility vehicles and pickup trucks with higher
price tags.
The pace of sales remains historically
strong, and analysts say solid economic indicators and an expected influx of
fresh models into U.S. showrooms in coming years should keep sales from
dropping too steeply.
GM Chief Economist Elaine Buckberg said
expected interest-rate cuts should help new-vehicle demand in the second half
of the year. The Detroit auto maker said it commanded higher prices for its
models in the second quarter, with pricing up 4% to $37,126 per vehicle.
“Auto demand was better than anticipated
in the first half, and we expect strong performance in the second half of the
year,” Ms. Buckberg said in a statement.
Fiat Chrysler’s 2019 Ram Power Wagon heavy-duty pickup truck, seen
at the North American car show in January in Detroit. Ram’s U.S. sales surged
28% in the first half of 2019.
Interest rates started to come down this
spring after swelling earlier in the year, with June’s average hitting 6%, the
lowest this year, according to Edmunds.
“High interest rates have been the
biggest story so far this year, and for good reason,” said Edmunds analyst
Jessica Caldwell. “The trickle-down effect has been significant for all areas
of the auto market.”
The slowdown in the U.S. market comes as
markets in Europe and China are cooling. In a research note last week, Morgan
Stanley forecast global auto production to fall 4% this year, which will
pressure profits for suppliers and car companies.
Shoppers turned off by high sticker
prices are finding attractive used-car deals as a surge of newer SUVs coming
off lease wind up on used-vehicle lots. Used-car sales grew by around 9% in the
first half of the year, according to an estimate from J.D. Power.
GM’s U.S. sales decline in the first
half was largely related to weaker sedan sales and tighter inventories of its
heavy-duty trucks. Fiat Chrysler posted lower U.S. sales for five of its six
brands, including Jeep. Its profit-rich Ram truck division was the one
standout, with sales up 28% in the first six months.
Toyota, Honda and Nissan saw slowing
sedan sales in the first half as more buyers moved to models such as the RAV4
compact crossover, Ridgeline pickup and the Pathfinder large SUV.
Subaru Corp. FUJHY -1.31% and Hyundai
Motor Co. bucked the broader
sales slowdown in the first half with sales up 5.2% and 1.7%, respectively, an
increase bolstered by strong sales of their sport-utility vehicles.
Appeared in the July
3, 2019, print edition as 'Auto Makers Slipped in First Half.'
Comments
The cost
of driving a car includes a $300 per month car payment and $100 per month
payment for auto insurance. Cars last longer these days and that reduces car
sales as people keep their cars longer.
Norb
Leahy, Dunwoody GA Tea Party Leader
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