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US light-vehicle sales slide 3.5 percent in July

02 August 2018 Stephanie Brinley, MBA

US light-vehicle sales slide 3.5% y/y in July

IHS Markit perspective

  • Implications : The US light-vehicle market's seasonally adjusted annual rate (SAAR) dropped to an estimated 16.8 million units in July, below the 17.15-million-unit mark in the first half of 2018. This was also affected by the fact that there was one less selling day in the month. Please note: all industry-level figures in this article are estimates, owing to the absence of official monthly sales results for General Motors (GM).
  • Outlook: Although light-vehicle demand declined in July compared with June, it remained above the level in the year-earlier period for the fifth consecutive month. Automotive consumers continue to benefit from high incentives, an easy availability of credit, and generally positive economic conditions. However, although deals are still plentiful, incentive growth has diminished. This, combined with higher interest rates and higher vehicle prices, could be a headwind in the second half of the year. IHS Markit's full-year projection for the US light-vehicle market in 2018 is 17.0 million units.

Detroit automakers

GM has opted to begin reporting sales on a quarterly, rather than a monthly basis. Therefore, GM has not reported its monthly sales for July, although industry sources estimate the company's sales at about 219,250 units during the month, down 3.0% year on year (y/y) and a little better than the overall industry performance. For the year to date (YTD), GM is estimated to have posted sales of about 1.69 million units, up 3.2% y/y and a stronger performance than the industry overall. At the time of writing, brand-level estimates are not available.

Ford Motor Company meanwhile saw its sales decline in July and the YTD. Ford-brand sales are down 1.6% y/y in the YTD after a 2.7% y/y decline in July. Lincoln sales are down 10.8% y/y in the YTD and declined 11.0% y/y in July. Ford Motor Company's total car sales declined 15.7% y/y during January-July, with utility vehicle sales down 0.8% y/y and truck sales up 5.0% y/y. Ford-brand car sales are seeing increasing declines as the year progresses. For the YTD, Ford-brand sport utility vehicle (SUV) sales have also declined (down 1.0% y/y) despite the addition of the EcoSport. Sales of the Ford F-Series remain strong, with a 4.6% y/y gain in the YTD. Although Navigator sales improved in July, Lincoln saw its sales decline in the month and they are down in the YTD. Lincoln's SUV sales may improve later in the year on the back of a facelift for the MKC and as the MKX is replaced by the Nautilus. A decision to pull back on livery sales for the Continental has also been holding that model line back.

Fiat Chrysler Automobiles (FCA) has reported y/y improvements in July and the YTD, largely from the Jeep brand. Jeep's sales improved 21.5% y/y in January-July, on the back of the all-new Compass, updated Cherokee, and Wrangler. Dodge sales are down 3% y/y in the YTD, with declines for all but the Challenger and Caravan. Chrysler sales dropped 13% y/y over the first seven months of 2018, with sales of the 300 down but sales of the Pacific up 6% y/y. Fiat-brand sales are down 44% y/y in the YTD, at 9,525 units - Alfa Romeo now easily outsells Fiat. However, Alfa also reported a 22% y/y decline in Giulia sales in July. The sedan has a full-year gain, as it was not available for all of 2017, reflective of the overall impact the market has on cars at the moment. As the launch of the Ram 1500 has seen some difficulty, its sales are down 6% y/y in the YTD, but they improved in July. FCA's fleet sales accounted for 10% of its sales in July, according to the company.

Japanese automakers

Toyota Motor Company saw its sales decline in June, reversing a gain in the prior month. For the YTD, Toyota's sales are on the positive side. Toyota's total car sales are down 8.7% y/y in the YTD and 18.0% y/y in July, while its truck and SUV sales were up 2.2% y/y in July and 9.2% y/y in the YTD. Despite a 5.1% y/y decline in Toyota-brand sales in July, for the YTD the brand is up 1.9% y/y. At Lexus, sales declined 12.1% y/y in July and are down 1.4% y/y in the YTD. Lexus car sales were down 27.9% y/y in July and 14.6% y/y in the YTD, with a new generation of the top Lexus sedan, the ES, due to arrive in September. The LS continues to see a strong launch year. Lexus utility vehicle sales are up 6.1% y/y in the YTD. Lexus's utility vehicle range is also receiving new product in 2018, with an additional UX later in 2018 and a three-row version of the RX. The RAV4 is firmly Toyota's best-selling vehicle, even as the company prepares to launch an all-new model.

American Honda was among the automakers reporting sales declines in July, pulling its YTD results into negative territory. Honda Division sales declined 8.4% y/y in July and are down 1.7% y/y in the YTD. Sales at the Acura Division declined 6.6% y/y in July and are down 2.4% y/y in the YTD. In 2018, Honda's trucks now solidly outsell its car lines, with sales over the first seven months of Honda-brand trucks and utilities reaching 434,169 units (up 3.6% y/y) and car sales slipping to 406,357 units (down 6.7% y/y). The CR-V is ahead of the Civic by a little less than 10,000 units in the YTD, with the Accord slipping further behind. Honda again saw tight supply of the Civic in July. These three models have accounted for 69% of Honda's US sales in the YTD, compared with 73% in the same period of 2017. Despite a strong performance from a new RDX (up 4.4% y/y), Acura's sales declined in July. This performance dragged down its YTD result from essentially even with the prior year in June to a decline. The MDX and RDX continue to account for most of Acura's sales, each outselling the combined passenger car sales total.

Nissan saw its sales decline sharply in July and the YTD as it shifted its strategy to reduce incentives and its reliance on fleet sales. Nissan's sales have now declined in three of the past four months. Including both Infiniti and Nissan, car sales fell 13.3% y/y in the first seven months of 2018, while truck/utility vehicle sales were flat, up only 0.4% y/y. The Nissan brand continues to see its best performance from the Rogue, at 241,737 units in the YTD, up 6.0% y/y, and ahead of the Toyota RAV4 and Honda CR-V. Amid slowing Nissan sales, the Rogue's lead over the RAV4 has dropped to about 2,200 units. The Nissan brand saw car sales drop 13.7% y/y in the YTD, while its light-truck sales have gained 1.6% y/y. Infiniti sales have declined 9.0% y/y in the YTD, with Infiniti car sales down by 8.5% y/y and utilities dropping by 9.2% y/y. Improvements are possible later in the year with the all-new QX50 and facelifted QX80, although the QX30 has seen sales drop 46.5% y/y in the YTD.

Subaru delivered an 80th consecutive month of y/y growth in US sales in July, on the back of another strong month for the Crosstrek and the Ascent's arrival. The all-new Ascent accounted for 7.7% of the brand's July sales volumes, while Subaru noted a best-ever month for the Crosstrek. In the YTD, Subaru's sales have increased 6.0% y/y. Subaru, however, is also seeing soft sales on the car side, with the Impreza, Legacy, and Outback all seeing declines in the YTD, along with the Forester.

Other automakers

Volkswagen (VW) Group is seeing its US sales improve as it moves away from the worst of the diesel crisis, and supported by the VW brand adding more competitive crossover utility vehicle (CUV) products. Sales of VW Group brands are up 6.5% y/y in the YTD, although this is not enough to put it back ahead of Subaru. The VW brand reports that its YTD sales are up 8.0% y/y at 203,418 units, with declines for the Golf family and the Jetta family. Audi reported its 104th straight month of US sales growth in July, its sales up 2.1% y/y, resulting in 4.4% y/y growth in the YTD. Porsche's sales have increased 6.3% y/y in the YTD.

Combined sales from Hyundai, Genesis, and Kia reverted to a y/y decline in July and are down 2.5% y/y in the YTD. Hyundai-brand sales declined 2.4% y/y in July, despite the addition of the all-new Kona, somewhat attributable to the Santa Fe sell-down, too. On 1 June, the brand revised the Sonata's pricing and packages, offering more value at a lower price point, but the brand still saw a decline in July. The Genesis brand's 62.6% y/y sales decline in July was the result of difficulties with an all-car line-up, as well as dealership growing pains. The G70 sedan is coming on line, however, and the brand is expected to announce its first dedicated dealerships in August. Genesis expects to see a notable improvement in the final quarter of the year as the issues begin to be ironed out. Meanwhile, Kia's US sales are down by 1.6% y/y in the YTD, with improvements for the Niro, Sportage, and Rio.

Outlook and implications

Although light-vehicle demand declined in July compared with June, it remained above the level in the year-earlier period for the fifth consecutive month. Automotive consumers continue to benefit from high incentives, an easy availability of credit, and generally positive economic conditions. However, although deals are still plentiful, incentive growth has diminished. This, combined with higher interest rates and higher vehicle prices, could be a headwind in the second half of the year. IHS Markit's full-year projection for the US light-vehicle market in 2018 is 17.0 million units.

There were 24 selling days this July, one less than in the year-earlier period. On a unit volume level, an estimated 1.37 million light vehicles were sold in the month, a decline of approximately 3.3% compared with July 2017. Owing to weather effects last year, upcoming monthly y/y volume comparisons in the second half of the year will be much more dynamic than seen thus far in 2018.

Sales results by manufacturer were mostly negative in July, in part due to the one less selling day, and automakers continued to report declining car sales. Volumes at Nissan (down 14.5%), Honda (down 8.2%), and Toyota (down 6.0%) suffered the largest y/y declines, while Ford and Hyundai volumes also dropped. At the other end of the spectrum, utility vehicles continued to sustain FCA's sales, up 5.9% y/y in the month.

Despite rising fuel prices, light-truck sales continue to outpace sales of passenger cars in an ongoing market shift. Overall, passenger car sales were estimated to be down by approximately 14.0% y/y in July, while light-truck sales were up more than 4.0% y/y and accounted for more than 69% of light-vehicle demand, compared with a 64% share in June 2017.

As a result of scheduled downtime, product changeovers, and ongoing inventory adjustments by OEMs, the July month-end stock of vehicles as reported by AutoData was down substantially from the month-end June inventory levels. July inventory was down approximately 237,500 units from the prior month, with about two-thirds of that coming out of light-truck stock.

Posted 02 August 2018 by Stephanie Brinley, MBA, Principal Automotive Analyst, IHS Markit

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