July Forecast: Another Dismal Month for Vehicle Sales - Except for Honda and Compact Vehicles

July Forecast: Another Dismal Month for Vehicle Sales - Except for Honda and Compact Vehicles

By Michelle Krebs

One doesn't need to be a fortuneteller gazing into a crystal ball to figure out that July vehicle sales, to be reported by automakers on Friday, continue to be in the tank. All one has to do is read recent headlines of downgraded 2008 sales forecasts, more production cuts and boosted incentives.

Edmunds.com released its July forecast Tuesday, predicting monthly sales will drop 10.7 percent from last July, adjusted for the difference in the number of selling days. The decrease is estimated at 3.3 percent on an unadjusted basis. Despite some last-ditch incentive efforts to save the month, all of the Big Six auto manufacturers, with the exception of Honda, are expected to report sales declines from a year ago. Similarly, sales of small compact vehicles continued to boom.

Even the venerable Toyota is likely to see another drop. Meantime, the combined market share of Detroit's three automakers is expected to hit a near-record low of 44.4 percent, down from 49.4 percent in July 2007 and from 46.4 percent in June 2008. The only time it was lower was in May when it fell to 44.3 percent.

"The combined market share for compact cars, compact trucks and compact SUVs is near its all-time high," observed Jesse Toprak, executive director of Industry Analysis for Edmunds.com. "We expect these three segments to make up around 35 percent of the total market in July, compared to just 23 percent in July of 2003."

Company-by-Company Forecast

In total, Edmunds.com forecasts July new vehicle sales (including fleet sales) to come in at 1.26 million units, a 3.3-percent decrease from July 2007  and a 6.3-percent increase from June 2008 on an unadjusted basis. July 2008 had 26 selling days, two more than last July 2007. When adjusted for this difference, sales decreased 10.7 percent from July 2007.

Edmunds.com forecasts the following sales results:

Chrysler will sell 117,000 units in July 2008, down 14.8 percent compared to July 2007 and up 0.2 percent from June 2008. This would result in a new-vehicle market share of 9.3 percent for Chrysler in July 2008, down from 10.6 percent in July 2007 and down from 9.9 percent in June 2008.

Ford will sell 176,000 units in July 2008, down 7.4 percent compared to July 2007 and up 3.1 percent from June 2008. This would result in a new-vehicle market share of 14.0 percent of new car sales in July 2008 for Ford, down from 14.6 percent in July 2007 and down slightly from 14.4 percent in June 2008.

GM will sell 266,000 units in July 2008, down 15.7 percent compared to July 2007 and up 1.3 percent from June 2008. GM's market share is expected to be 21.1 percent of new-vehicle sales in July 2008, down from 24.2 percent in July 2007 and down from 22.2 percent in June 2008.

Honda will sell 160,000 units in July 2008, up 13.3 percent from July 2007 and up 12.1 percent from June 2008. Honda's market share is expected to be 12.7 percent in July 2008, up from 10.8 percent in July 2007 and up from 12.0 percent in June 2008.

Nissan will sell 88,000 units in July 2008, up 0.2 percent from July 2007 and up 16.0 percent from June 2008. Nissan's market share is expected to be 7.0 percent in July 2008, up from 6.7 percent in July 2007 and up from 6.4 percent in June 2008.

Toyota will sell 217,000 units in July 2008, down 3.3 percent from July 2007 and up 12.1 percent from June 2008. Toyota's market share is expected to be 17.2 percent in July 2008, even from 17.2 percent in July 2007 and up from 16.3 percent in June 2008.

Source: Edmunds.com

Last-Ditch Efforts Don't Save the Month

Some automakers signaled another weak sales month with enhanced incentives intended to end the month on a higher note and further production cuts to better position them going forward.

At the ribbon cutting for a new powertrain center, GM CEO Rick Wagoner signaled July sales would look similar to sales in June when GM reported at 15-percent decline from the year earlier.

In an effort to push month-end sales, GM said last week it would offer employee discounts to non-employees on a limited basis. GM employees can give one employee discount away through the end of July. That is in addition to already richened discount programs in effect.

Ford has been offering employee-financing to clear out its inventory of 2008 Ford F-Series pickups to make way for the new model, the introduction for which has been pushed into later fall.

On Monday, GM announced would slash another 117,000 SUVs and trucks from its upcoming production schedule. The automaker will eliminate shifts - and 1,760 jobs -- at truck plants in Moraine, Ohio, and Shreveport, La., which make trucks and SUVs. GM's goal is to cut a total of 300,000 units of truck and SUV capacity by year-end.

Also on Monday, Toyota announced a downward revision to its global sales forecast due to its lower sales in the U.S. Toyota recently said it would cut back its production of Tundra pickup trucks and Sequoia SUVs. At the same time, the Japanese automaker has opted to build the Prius hybrid at its new Mississippi plant instead of the Highlander SUV.

Chrysler announced last week that it would extend no-interest financing for six years to its Jeep Commander and Cherokee, Chrysler Aspen and Dodge Durango SUVs through month-end. It's the same deal Chrysler is offering on 2008 Dodge pickup trucks to clear inventory for the redesigned 2009 Ram. At the same time, however, Chrysler said it would no longer offer leasing through Chrysler Financial as of Aug. 1.

Honda Bucks Sales Trend But Struggles with Profits

As it has throughout the year, Honda is expected to buck the industry trend and report a gain in sales, according to Edmunds.com's forecast.

In June, Honda surpassed Chrysler to become the nation's fourth-largest automaker and it is closing in on Ford for the No. 3 spot. Last month, Honda's market share was 12%, less than three percentage points behind Ford's 14.6%. Last summer, Ford was 7 percentage points ahead of Honda, which sold nearly 100,000 more cars than Ford in the first six months of this year.

And Honda is prepping to produce and sell even more cars in the second half and into 2009. In September, Honda begins producing the hot-selling Civic, which was the nation's No. 1 selling vehicle in May, at its new plant in Greensburg, Ind. The plant has capacity to build 200,000 Civics a year.

But Honda has its struggles as well. The automaker recently said it would cut the production of its Honda Odyssey minivan and its newly redesigned Pilot SUV due to slow sales. And Honda's success --- and thus heavy dependence -- in the U.S., however, is a mixed blessing. Honda relies on North America for 70 percent of its operating profit, which is being hurt by currency exchange rates. To that end, Honda, which reported an unexpected higher profit in the just-ended quarter, cut its full-year operating profit last week. That caused Honda's stock to fall nearly 3 percent, the biggest drop since June 19, according to Bloomberg News.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.