With about 3/4 of the totals in, vehicle sales in June are running no better than even compared to May’s 16.7 million annualized rate according to Econoday.
The Wall Street Journal report is much weaker: U.S. Auto Sales Fall as Fewer Vehicles Go to Rental Chains.
According to the article subtitle, GM, Ford and Fiat Chrysler are moving away from practice of dumping unwanted inventory into rental lots. The body reads quite differently. It is the rental car dealers cutting back due to warranted fears of a decline in used vehicle prices.
Auto sales continued to slide in June, as car buyers react to higher vehicle prices and Detroit backs away from dumping unwanted inventory into rental-car lots.
General Motors Co. (GM), Ford Motor Co. (F) and Fiat Chrysler Automobiles (FCAU) reported steep monthly sales declines compared with the same period in 2016. While retail demand is losing steam, each of Detroit’s players also reported significant reductions in deliveries to daily-rental companies, long the Motor City’s biggest customers.
Even as auto makers ramp up incentive spending to improve dealer traffic, transaction prices are rising as cars are loaded with more safety gear and connectivity features. A consumer shift away from sedans and toward pricier sport-utility vehicles also aided the trend.
Edmunds.com reported that the average monthly payment on a car or truck has soared above $500, forcing buyers to stretch more than ever to obtain a new set of wheels. The firm estimates the average auto-loan length reached a record 69.3 months in June, with the average amount of financing reaching $30,945, up $631 from May.
GM’s sales fell 5% to 243,155 vehicles in June, while Ford’s sales totaled 227,979 vehicles, down 5.1%. Fiat Chrysler’s sales slumped 7% to 187,348 vehicles.
Japan’s top sellers fared better during the period.
Honda Motor Co. reported a 1% increase compared with the previous June with 139,793 vehicles sold, aided by gains at its Acura luxury division, while Nissan Motor Co. sold 143,328 vehicles, or 2% more than the prior year, as it ramps up its reliance on trucks. Toyota Motor Corp. notched a 2.1% gain, with 202,376 vehicles sold.
Certain Asian auto makers, including Korea’s Hyundai Motor, have fueled sales with rental-car sales. At Nissan, rental sales surged 37% in 2016 and were up 9% this year through May, making Nissan the only major auto maker to boost rental deliveries, according to data from Bobit Business Media, a publisher of trade magazines.
Enterprise, one of the leading car-rental firms, reduced its vehicle purchases in the first half of the year compared with 2016, said Kurt Kohler, a senior executive in charge of the rental company’s fleet acquisition. He said signs of declining used-vehicle prices heading into the year prompted Enterprise to narrow its shopping list.
“The market started to move on us, so we pulled back a bit,” Mr. Kohler said. “The car segment already had been declining, but we also saw pricing coming down on SUVs and trucks. That affected how much we wanted to buy.”
Plateau Expected
Overall industry demand softened over the first half of 2017, however, falling about 2% through six months, according to JD Power. The development ushers in an expected plateau for auto sales, an important driver for the broader U.S. economy.
It’s a mystery why anyone would expect a sales plateau with residual values plunging, the percentage of subprime loans increasing, total financing amount increasing, loan lengh at a record 5.75 years, the Fed hiking, and the economy clearly slowing.
Auto sales account for about 20% of retail spending. With domestic sales down and imports doing better, we have still more signs of second-quarter GDP weakness.
Mike “Mish” Shedlock
anyone financing a car today for 5 years is a luddite. That car will be worth scrap in 2022 because level 4 self driving will be standard.
anyone buying a car today needs to realize it will have nil resale value in 5 years
Thanks for the Holiday comic relief.
level 4 self driving exists today and is operating in beta testing. It’s very real.
level 5 ? not so much
Vooch, you’re either an asshole, an idiot, or both.
Why finance a car, when one can ride for free on the hype train?
The markets refuse to register that the economy is sleepwalking. For them it is a case of taking the surveys seriously and dismissing the hard evidence. Shades of 2008.
“Overall industry demand softened over the first half of 2017, however, falling about 2% through six months, according to JD Power. The development ushers in an expected plateau for auto sales,”
…
Really, JD Power? … “expected”?
You have been (regularly) slashing year forecast.
April:
“As the outlook for 2017 is realigned based on current factors, LMC is taking the edge off the forecast for total light-vehicle sales in 2017, with a reduction of 40,000 units to 17.5 million units, now a decline of 0.1% from 2016.”
http://www.jdpower.com/press-releases/jd-power-and-lmc-automotive
late June:
“the prolonged pullback in fleet volume combined with the leveling off of the retail market has led to another trimming of the outlook for 2017. LMC’s forecast for 2017 total light-vehicle sales has been cut to 17.1 million units, down from 17.2 million last month and a decline of -2.6% from 2016.”
http://www.jdpower.com/press-releases/jd-power-and-lmc-automotive-forecast-june-2017
If you are having trouble with this report, Amazon is running a special on rose colored glasses and fresh daisy fragrance. It will seem much better after using them both.
No money left after paying Obamacare extortion.
Old car runs fine, and after market repair parts are frequently higher quality than OEM parts.
Old cars don’t pay new car property taxes.
Socialists are causing economic suffering, as always.
Touche!
You ought to be an economist! No offense meant!
Sales down for both GM and Ford about 5%. Why are the stocks up 1.8% and 3.3% today. Did they expect the sales to be much worse? With rents, housing prices going up in most places and student loans payments how are the younger people to afford much? Hmmm.
The human traders are all at The Hamptons for a long holiday weekend. Before they left they ordered the algorithms to not disturb* them.
*do what you gotta do to keep stocks UP
Hey, as good as any excuse …
I’m asking myself the same question. Something is amiss here.
I see David Stockman shares your concerns about the US car market.
https://dailyreckoning.com/coming-carmageddon/
With automation replacing workers, why would we need a new car? Where are we going?
Most US citizens spend their adult life in a state of bondage,never free of debt.
The collective wisdom of the market does not think this is bad news: dollar is up, gold, silver, treasuries down.
Do you think vehicles coming from Canada are a factor? I know of several car dealerships in my town in Canada that give generous trade in allowances for one and two year old vehicles (especially trucks) on new vehicles. They then export the used trucks south to take advantage of the exchange rate.
Dealers can make $3000-$5000 per vehicle. Profit is made as long as the dollar is below about $.90. It has recently been below $.75.
Aside from the profit on the used export it also tightens up the used market and makes new sales more competitive.
It likely has the opposite impact down south.
US automakers loaded their cars with planned obsolescence. I am confident the operating inventory can vaporize inside of five years.
“The development ushers in an expected plateau for auto sales, an important driver for the broader U.S. economy.”
Subprime auto lending has been an important driver for the economy. It will be an important driver in reverse, as well, just as it was during the housing bubble.
The prices on the carmax web site are ridiculously high. I think the so called expected drop in used car prices will simply be a normalization, Not a plummet.
Look at Zillow! I am glad I kept my 2000 Toyota Avalon, I have just broken it in at 279,000 plus miles. However the transmission is starting to act up a little. I think I can get another 30,000. miles on it before I have to get a new car in late 2018! Our local Chevy dealer is parking cars on the shopping center lot across the street!!!!!! They added a temporary fence and some lights and you have another car lot to sell from! Wahoo!
Maybe a Suburu WRX for a little fun before I go.The 50,000, four door, 25 miles per gallon, etc. sports car. with 305 hp! Maybe 40K Ha!