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US Auto Sales Sag, Hyundai Meets Carmageddon

WOLF RICHTER–Ford, GM, Hyundai and others tried hard to curtail their sales to rental car companies, or whatever. That’s was the theme among analysts on Monday, after automakers reported crummy June new vehicle sales.

What really happened?

Rental car companies continued to trim their fleets as they’re traversing their own structural hell, squeezed by ride share companies and falling used car wholesale prices. They’re not buying as many vehicles anymore because they don’t need more, regardless of what automakers are trying to do to sell them more.

Retail customers are switching to used cars that are competing often on the same dealer’s lot with new vehicles. They’re particularly after recent-model year cars that look similar to new cars but sell at much lower prices. Dealers buy them at auctions around the country, where rental car companies and leasing companies are selling them. Used vehicle sales are expected to set a record this year north of 41 million vehicles. This is particularly eating into new car sales, the mainstay of rental car companies (rather than new truck sales).

Consumers do this because they’re stretched to the limit by new car prices that continue to rise, even as wages cannot keep up. Edmunds reported that in June:

  • The average monthly payment jumped to a record of $517 (up from $510 in May)
  • The length of the average auto loan rose to a record 69.3 months
  • And the average amount financed jumped by $631 from May to $30,945.

The fact that negative equity on trade-ins hobbles from record to record doesn’t help matters. So something has to give.

And this is what gave:

  • Overall car and light truck sales in June fell 3% year-over-year to 1.474 million vehicles, according to Autodata. This is the number of vehicles sold and delivered by dealers to their customers, or delivered by automakers to their large fleet customers.
  • It was the sixth month in a row of year-over-year declines.
  • Truck and SUV sales rose 4.1% to 933,378 units. But car sales plunged 13.2% to 541,982 units.
  • For the first half, sales are down 2.1%. Truck sales up 4.6%; car sales down 11.4%.
  • Sales to fleet customers dropped 7.8% in June, not because automakers refused to sell them, but because fleet customers cut back their orders.
  • Retail deliveries dropped 1% in June.
  • The Seasonally Adjusted Annual Rate of sales (SAAR) in June fell to 16.51 million light cars and trucks, the fourth month in a row below the 17-million mark, and the lowest since February 2015. So regardless of how this is being dressed up, it’s not propitious.

Among the automakers, there were some notables:

GM’s car and truck sales fell 4.8% to 242,873 vehicles. Truck sales rose 11% to 192,067 units and are up 5.8% for the first half. But car sales plunged a stunning 38.2% to just 50,806 units and are down 18.6% for the first half. At this pace, GM car sales are moribund!

GM dealers ended the month with 105 days’ supply! That’s up from the already catastrophic 101 days at the end of May. This is the kind of inventory GM dealers sat on during the Financial Crisis when GM went bust. But no big deal this year, apparently.

Ford car and truck sales fell 5.0% to 227,979 and are now down 3.8% for the first half. Ford truck and SUV sales rose 2.2% in June to 174,435 units, and 3.0% for the first half. But car sales plunged 23% to 52,731 units and are down 20.2% so far this year.

Ford retail sales fell 2.1% in the first half to 864,156 vehicles. But fleet sales in June plunged 14% to 75,583 vehicles. Ford blamed the 7.1% decline in fleet sales so far this year not on its refusal to sell to fleets, as the analysts were trying to make it seem, but because of “the timing of fleet deliveries.”

On the semi-positive side, compared to GM, vehicle inventory at Ford dealers came in at 66 days’ supply, about the same as last year, and not too far above what is considered the OK-line of 60 days’ supply.

Hyundai got crushed again and enters Carmageddon. Among the major automakers, it booked the steepest sales plunge in June: Total unit sales plunged 19.3% year-over-year, after having already plunged 19.1% in May. Even light truck sales, the growing segment in the US, fell 11.6% to 22,586 units. Car sales plummeted 23.9% to 31,921.

This sales deterioration has come fast and furious for Hyundai and is now dragging down the first half, with total sales down 7.4%, as truck sales are still up 11.6%, but car sales are down 14.3%.

These crummy sales – despite record incentives!

Automakers spent an average of $3,550 in incentives per new vehicle sold in June, according to ALG, cited by Automotive News. It was the highest for any June, and up 9.7% from the already high levels a year ago. The average incentives are estimated to have reached 10.8% of the average transaction price.

Biggest incentive spenders per new vehicle sold:

  • Daimler: $4,449
  • FCA: $4,389
  • GM: $4,361
  • BMW: $4,157
  • Ford: $4,157
  • Nissan: $4,148
  • Volkswagen: $3,460
  • Hyundai: $3,259
  • Kia: $3,384
  • Toyota: $2,506
  • Honda: $2,056
  • Subaru: $1,032

Nissan and Kia spent 15% of their average transaction prices on incentives, the highest in the industry. Hyundai, whose sales got crushed the most, spent the second-most on incentives: 14.4% of its average transaction price. GM, Ford, and FCA spent between 12% and 13%.

In other words, automakers spent a record amount of incentives, with Hyundai going all out, as inventories are piling up, and sales still declined. And in Hyundai’s case plunged. For the industry, this has been the case every month so far this year, which, despite the efforts to put a hopeful spin on it, is beginning to jangle some nerves.

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