US auto stocks suffer amid rising incentives – USA TODAY
Automakers turned to discounts to jolt U.S. sales in July, but saw relatively flat sales for the month, suggesting that the industry may be entering a period of heightened competition for market share.
Auto sales rose 0.7% in July compared to the same month last year, with higher sales of crossover SUVs and pickups nearly offsetting lower sales of cars, Autodata reported Monday.
General Motors’ July sales fell 1.9%. Ford Motor’s sales dipped 3%. Fiat Chrysler posted a 0.3% increase, according to Autodata.
The largest Japanese automakers delivered mixed results. Toyota Motor’s U.S. sales fell 1.4%, Honda posted a solid month with a 4.4% increase and Nissan eked out a 1.2% sales increase.
Embattled German automaker Volkswagen Group had another tough month, down 3.8% overall, with the company’s namesake brand posting an 8.1% sales decline. The company is grappling with the fallout of its emissions scandal, which has prevented dealers from selling diesel vehicles for nearly 11 months.
Analysts at Edmunds.com, Kelley Blue Book and TrueCar had projected an industry sales increase of 0.8%, a decline of 0.5% and a decline of 0.4%, respectively.
Amid increasing signs that the auto sales market has hit a plateau — albeit near record-high levels — manufacturers increased average incentives to $3,300 per vehicle, up 12.5% from a year earlier, according to Kelley Blue Book.
Auto sales for July hit an annualized pace of 17.88 million vehicles, according to Autodata.
But with buyers paying an average of $30,601 in July, up only 1.9% compared to a year earlier, rising discounts could undermine automakers’ profitability.
Mark LaNeve, sales chief for Ford, said retail sales are “not as strong as we previously expected” for the year. Consequently, he said, industry incentives are rising.
“The major players are going to protect share,” he said. “It’s a more competitive market than we’ve experienced in the past five, six years.”
He pledged to remain “disciplined but competitive” in the battle for market share.
Disheartened investors fled stocks of the major U.S. automakers on Tuesday. General Motors shares fell 4% to $30.04, Ford Motor fell 4.3% to $11.94 and Fiat Chrysler fell 4% to $6.08.
IHS Automotive lowered its full-year forecast to 17.51 million vehicles, which would narrowly edge 2015’s record of 17.47 million.
To be sure, though the results weren’t particularly staggering, a plateau is still a profitable place for the industry. Plus, consumers are flocking to bigger, more profitable crossovers, sport-utility vehicles and pickup trucks and abandoning small cars.
“We are at record volume levels and there are a lot of factors that suggest we could stay here,” said Mark Strand, senior manager of market intelligence for Autotrader.
Those include a stable job market and cheap, available credit, he noted.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.