May car sales are flat. The sedan heads toward irrelevance – Los Angeles Times
Rich incentives, sweet lease deals, flexible financing options: they’re not enough. American car buyers continue to turn their backs on anything with four doors and a trunk.
Automakers released sales figures for May on Thursday, numbers that comport with major industry trends — sedan sales down, pickup sales up, sport utility sales up. On average, the market is flattening out after seven years of record sales.
Overall sales were flat for May, said Kelley Blue Book. If current conditions continue, analysts expect 17 million cars and light trucks will be sold in 2017, down from 17.55 in 2016.
Sedan sales were down about 20% in May. The shift from sedans to sport utility vehicles, small and large, is likely to continue.
Millennials are driving the change, according to Michelle Krebs, senior analyst at Autotrader. Young buyers propelled the compact utility market and now are moving toward medium and large sport utilities as they began to have children, she said.
The three top reasons for choosing a utility vehicle over a sedan, she said, are cargo space, high-up seating position, and ease of entry and exit.
“I don’t think that bodes well for traditional cars,” she said.
Like many other analysts, she predicts automakers will continue to trim back sedan production, which could well affect overall auto industry employment.
There wasn’t much big news about individual automakers in the May statistics. Ford sold a total of 241,126 vehicles in May, overtaking GM in total sales by about 4,000 vehicles, but Krebs said that’s because some major fleet deals were registered that month. “Next month it could be General Motors.” The media focus on a monthly sales rivalry between Ford and GM is “silly,” she said; it’s profits that count.
Ford replaced Chief Executive Mark Fields in May under shareholder pressure as the company’s stock price lagged its competitors.
But Ford F-150 pickup truck sales remain strong, and sales are up for its Escape compact utility vehicle. “Their struggle is similar to the rest of the industry,” said Alec Gutierrez, senior analyst, at Kelley Blue Book.
Among foreign automakers, sales increased 12.1% for Subaru, 4.3% for Volkswagen, 3% for Nissan and 0.9% for Honda but fell 0.5% for Toyota. Automakers, overall, sold about 1.53 million new cars and trucks in the U.S. during the month, or about 0.3% more than the same month last year, according to the average of three industry estimates.
The average sales price for vehicles in May was up, to about $33,500. That’s mostly because utility vehicles and trucks cost more than sedans. They also provide fatter profit margins to manufacturers.
Road hazards may lie ahead for automakers, especially if the Federal Reserve Board raises interest rates. That would put a crimp in loans and leasing. Easy terms for both have helped fuel the industry boom.
For sales, though, the rest of the year is expected to be profitably undramatic.
The Associated Press contributed to this report.