Healthier May Sales Have Industry Feeling More Confident

Healthier May Sales Have Industry Feeling More Confident

By Bill Visnic June 2, 2010

It's about time that the U.S. auto market followed script for a change, and May was that month: There was a modest increase in sales compared with last May, befitting the annual gain of 10 percent or more that the industry has forecast for the year as a whole. Steady as it goes was the byword.

For the month, automakers sold 1,099,000 vehicles in the U.S., 19 percent higher than the nadir of May, 2009, and an improvement from about 982,000 this April. More important, the pace of sales in May was about 11.6 million units on a seasonally adjusted annualized rate (SAAR) basis, a significant uptick from the 11.2-million rate posted in the previous month and right in line with the industry consensus that full-year sales will end up between 11.5 million and 12 million units compared with 10.4 million for 2009.

"This supports the thesis for the moderate recovery we've been forecasting," said George Pipas, head of U.S. industry analysis for Ford.

Among the highlights was the fact that Chrysler's gain was among the strongest, with 33-percent higher sales in May than a year ago - when, of course, the company's very continued existence remained in question.

Still, Chrysler appears to be regaining sales momentum as its finds its way under dual control of Fiat and the U.S. government.

Meanwhile, however, Toyota's sales gain of just 7 percent was among the lowest of the industry's major players even though the company was still in the midst of its most ambitious incentive program in its history. Toyota is launching a new marketing campaign aimed at reminding American auto buyers of its traditional strengths in quality and safety.

Overall, May's middling increase was fueled by several factors, including the mild economic recovery, strong incentive programs by Toyota and others, the materialization of a significant number of buyers in showrooms over the Memorial Day weekend, outsized fleet sales by the domestic Big Three, and what may or may not be an overall improvement in credit availability for American consumers.

"May saw the best monthly sales volume for the industry since the Cash for Clunkers program last August," noted Jessica Caldwell, senior U.S. industry analyst for Edmunds.com. "Overall, it was a good month. The numbers outpaced some expectations."
Generally, OEM executives agreed with that assessment and looked for continued slow but steady improvement.

Bob Carter, group vice president of the Toyota division for the U.S., said that he remained "confident in the long-term strength of the economy and expect it to continue on its path of moderate recovery."

Steve Carlisle, vice president of U.S. sales operations for General Motors Co., said that he expects "to see continual gradual improvement in housing markets. Combined with inflation at record low levels, we also expect credit conditions to improve."

At the same time, however, Emily Kolinski-Morris, Ford's senior U.S. economist, said that "consumer credit still remains constrained" and underscored this factor as the single biggest determinant of whether industry sales would continue straight-line improvement - or waffle along with the economic recovery.

And Carlisle and others continued to sound cautionary notes about the economic underpinnings of the market, pointing to ongoing volatility in the financial markets, which could derail consumer confidence.

General Motors: According to Plan

GM sold 212,800 units in May, up 17 percent compared with a year earlier and an improvement of 21 percent from April 2010.

The performance marked GM's first May year-over-year sales increased since 2007, according to Edmunds.com analysis. And the company's April-to-May increase was the best in at least the last eight years.

"Our May performance demonstrates that our plan to profitably grow sales and share is working," declared Carlisle. He noted that retail sales for GM's four remaining brands increased by 25 percent in May over a year ago and were up by 19 percent year-to-date. May was the fifth consecutive month during which GM four brands showed overall double-digit sales increases.

Still, a huge factor for General Motors was yet another month of extremely robust sales to fleet customers. Sales to daily-rental companies and commercial and government customers were up 44 percent for GM compared with May 2009 and accounted for 38 percent of the company's overall volume in the month. For the year, fleet sales were up 64 percent over 2009 and represented 33 percent of GM's sales so far.

Historically, GM likes to keep the fleet portion of its sales between 20 percent and 25 percent, and Carlisle stressed that he still expects the level to return to about 25 percent for the entire year. The numbers so far, he explained, "have been driven by higher-than-normal sales" to rental companies as they rebuild their own fleets with the economic recovery.
GM again stressed the popularity of the brands' newest vehicles. Buick LaCrosse, for example, accounted for about 43 percent of all Buicks sold in May, helping the brand to its second-best sales month in the last 19, Edmunds.com said.

"And Regal is coming on line this summer, which will help Buick even more," Edmunds.com's Caldwell said about the brand's new sedan launch.

Carlisle also noted GM's increasing success in the market for crossover vehicles - those usually built on a car platform rather than a truck platform, as sport-utility vehicles are. "We've long been known for being a pickup company, but we're the No. 1 maker of crossovers," he said.

Indeed, while crossovers as GM defines them have grown to 24 percent of all U.S. sales over the last five years from 13 percent, they have become 26 percent of GM's overall sales mix, compared with only 8 percent five years ago.

While GM has been offering generous incentives to try to match Toyota's aggressiveness, Carlisle said that its overall incentive costs during May rose only $200 per vehicle on average compared with April and were down by about $500 per vehicle from May 2009. "We'll continue to manage incentives prudently to support [vehicle] residual values, which also are up for each of our brands," he said.

Ford Maintains Momentum in May

With inventories less than targeted levels, incentives leveling and sales on the upswing, Ford Motor Co. presented an upbeat tone regarding its 27.3-percent improvement compared with last May's sales.

While talk on a sales call with reporters and analysts was mostly about sustained sales improvements and modest production increases, the day's major news was the confirmation that Ford is jettisoning its underperforming Mercury sales division. Mercury's bleak condition was symbolized by May sales results: where the Ford brand and most rival automakers posted double-digit gains, Mercury was down 10.7 percent compared with May, 2009, although the brand's year-to-date sales remained up by 11.6 percent.

Ford said inventory at the end of May was 371,000 units, a 48-day supply. This lower-than-ideal inventory prompted Ford to increase second-quarter production by 15,000 units, to a total of 640,000 and project a third-quarter build of 570,000 units, less than the second quarter but still 16 percent more than the third quarter of 2009.

Yet Ford sales were boosted by outsized fleet sales, which accounted for 37 percent of May's total sales volume - a number that represents a jump of 32 percent compared with last May. By contrast, Ford's retail sales were up by 19 percent in May.

Ford crowed about the May sales performances of its biggest and smallest, saying orders for the all-new 2010 Fiesta subcompact, just now going on sale, have been living up to highly charged expectations. "Response has been very strong," said U.S. sales analyst George Pipas, adding the number of Fiestas dealers have indicated they want is 2.5 times Ford's projected June production.

And Pipas said sales of the newly launched 2011 F-Series Super Duty pickup also are running hot: May was Super Duty's best sales month in two years and the mix of 2010- and 2011-model sales were up 82 percent compared with last year, thrusting total F-Series sales to 49,858, a 49.4-percent gain.

Other big performers included the Fusion midsize sedan, its 22,381 sales marking the nameplate's best-ever May, and the soon-to-be-replaced Focus chipped in with a solid 12.6-percent gain and is up a rather remarkable 31.4 percent for the year.

And much to Mustang lovers' delight, the ponycar's 10,225 sales in May - its strongest month in almost two years thanks largely to the availability of the significantly revised 2011 model - smacked back arch-rival Chevrolet Camaro's 8,931 and now the race is well and truly running for the 2010 musclecar sales title.

Ford's Explorer and Expedition had modest gains in May and the Edge crossover, due for substantial upgrades for 2011, shot up 42.6 percent to 13,660 units. The only Ford-brand utility vehicle to post a loss in May was the Flex, dropping 10.5 percent to 3,855 sales.

Mercury, earmarked for the junkyard, had two gainers in May: the outsized 128.9-percent leap of the Mountaineer and a 22.4-percent improvement for the Mariner. Overall, Mercury sold 41,680 units through May.

The Lincoln lineup is the beneficiary of Mercury's demise, and the additional new resources devoted to Lincoln don't come a moment too soon: the brand is skimming along at a year-to-date pace exceeding 2009's weak sales by just 11.5 percent - and by measure of volume, trails the brand Ford brass have elected to discontinue. Through May, Lincoln moved 37,444 vehicles, led by the MKZ midsize sedan and the MKX crossover, also being redone for 2011.

None of Lincoln's current models have had sustained impact. The MKS sedan was up 17.6 percent compared with last May, but the flagship car's total sales for the month were just 1,554; the MKS also remains 6.7 percent off year-to-date. In fact, the Town Car (its days are numbered) and the Navigator SUV - two models well out of sync with the market - are the only two Lincolns in positive sales territory for the year, a matter that should give Lincoln planners plenty to consider as Ford moves forward without the 71-year-old Mercury.

Chrysler: Glimmers of Life

Chrysler sold 105,000 units in May, up 33 percent compared with May 2009 and up 10 percent from April 2010. This is Chrysler's first year-over-year gain for May sales since 2005, Edmunds.com analysis shows.

It was also the first time that sales topped the monthly threshold of 100,000 vehicles for Chrysler since March, 2009, when it was in the depths of its pre-bankruptcy financial struggles. And Chrysler sales exceeded industry-wide growth for the second month in a row.

However, as with GM and Ford, fleet sales apparently played a huge role in Chrysler's robust results. Edmunds.com's Caldwell estimated that they comprised about 40 percent of Chrysler's overall sales in May.

Still, there were highlights aplenty for Chrysler. Dodge Brand sales were up 73 percent compared with a year earlier; Chrysler brand sales were up 29 percent; and Jeep brand sales increased by 6 percent.

Chrysler just began building the new Jeep Grand Cherokee and expects its rising retail availability through the summer to contribute to sales momentum for Jeep and for the company.

In another sign that Chrysler may be righting the ship, its corporate-wide inventories were 49 days at the end of May, a 25-percent decline from a year earlier and well within the 60-day ideal the industry seeks.

 

Toyota: Hoping to Move On

Toyota Motor Sales USA sold 162,800 units in May, up 7 percent from a year earlier and up 4 percent from April. The gain was well below the average 16-percent May-over-May gain for the company in the U.S. market during the last several years, according to Edmunds.com analysis.

Carter acknowledged the meager improvement but noted, "By Memorial Day weekend, consumers were back in a buying mood and easily posted the best sales weekend of the entire year."

And Carter noted that Toyota has continued its historic lack of reliance on fleet sales, making it much more dependent than its major, U.S.-based competitors on retail sales. Toyota led the industry in retail sales for the third consecutive month in May, he maintained.
The American Big Three each may have experienced a disproportionate boost from fleet business in May, but Toyota was stuck depending on the American consumer - who's still feeling iffy. Industry-wide retail sales increases for the month were far less than overall fleet-sales increases.

"There is fragile consumer confidence, with the stock market, unemployment rates and the economy," Carter said, and consumer anxiety over those factors apparently "slowed down retail sales noticeably in the middle of the month."

Carter said that, with May sales results, Toyota faced a much tougher comparison than some competitors, especially GM and Chrysler, because the latter "were at the height of their financial turmoil" a year ago and "we were enjoying some benefit of that."

He said that Toyota also needs to shift its inventory balance more toward SUVs than it is now, because Americans have been taking advantage of an unexpected softening in gasoline prices to purchase higher-than-expected numbers of larger vehicles rather than the small sedans in which Toyota has specialized.

Toyota also was dealing with the lagging efficacy of its massive incentive program in May. Launched initially as an answer to consumers' lack of confidence in the company's handling of last winter's massive safety recalls, the company's lucrative 0-percent financing offers have lost some of their sparkle, especially as competitors have stepped up similarly.

"As with any promotion, its effectiveness does run its course," Carter said. "The industry is still in a contracted position; the market is very competitive and we'll do what we need to stay competitive," he added in explaining May's results - and the fact that Toyota is continuing its 0-percent loan programs in June. A new wrinkle is that the loans now are available for the first time on Toyota's 2011 models, which are on dealer lots in increasing volumes.

Toyota is hoping to get American consumers to move beyond an "incentive watch" in part with the launch of a new marketing campaign that will feature Toyota engineers and customers. "We'll see a transition from a national retail message to a national brand message," Carter said.

Toyota's Lexus luxury brand also offered attractive interest rates for new leases, helping the brand to a 31-percent sales increase for May while overall luxury sales improved by about 16 percent.

Kurt McNeil, vice president of U.S. sales and service for Cadillac, admitted that Lexus's "aggressive" incentives were helping it gain market share. "But it will be quite costly, from what we can see," he said.

Hyundai Still Sprinting

The Hyundai Group (Hyundai Motor America and Kia Motors America combined) posted another in a string of strong monthly gains with a 28-percent sales increase compared with May, 2009. With a raft of well-received and solidly selling new models, both Hyundai and Kia continue to carve out their place among the industry's big-time players.

For Hyundai, it was the brand's best-ever May, selling 49,045 vehicles, led by an impressive 21,195 sales for the 2011 Sonata midsize sedan, a 92-percent gain. And the all-new Tucson compact crossover blasted off with a 227-percent surge, moving 4,395 units in May.

Hyundai emphasized the Sonata's retail sales are the industry's third-best, shouldering past such worthies as the Ford Fusion, Chevrolet Malibu and Nissan Altima.

The Genesis line hit a monthly sales record in May, its 2,480 units comparing with 2,079 in May, 2009. And the Elantra compact car surged for a 41-percent gain in May.

But not everything is perfect at Hyundai: the Accent small car dropped 27 percent and Hyundai's larger crossovers, the Santa Fe and Veracruz, respectively slid 5 percent and 39 percent. Only the Veracruz and the Azera have reduced year-to-date sales, however.

It also was a best-ever May at Kia, with sales of 31,431 representing a healthy 20.6-percent increase. The brand was led by the 8,166 sales of the popular Sorento crossover, followed by 7,299 sales of the newish-nameplate Forte (just 10 Fortes were sold in May 2009) and another solid month from the Soul compact hatchback, which sold 6,134 units, a 62-percent hike compared with last May.

Decliners for Kia included the off-key Borrego SUV, the Amanti quasi-luxury sedan and the Rondo mini minivan.

Edmunds.com analysts note another distinction for Kia: it is winning the "box car" derby with sales of its Soul handily outpacing the Nissan's Cube (2,295 units), Scion's xB (1,879 sales) and the Honda Element (1,378) in May.

 

Honda Steady But Paying For It

Discounting last August's Cash for Clunkers-fueled sales, American Honda Motor Co. Inc.'s May sales of 105,407 represented Honda's best monthly performance since August, 2008 and were a solid but not outstanding 19.1 percent better than May, 2009.

But Honda's recent sales have been boosted by paranormal incentives, particularly on the lease side. Data from Edmunds.com indicates Honda's lease rates have jumped from a low of about 10 percent last August to more than 30 percent in April and May.

It's helping Honda maintain the Accord and Civic as sales leaders in their respective segments. At 30,077, Accord sales were 33.1 percent better than last May, while the Civic's formidable 28,458 represented a 37.3-percent gain compared with May, 2009. Even the Pilot and Ridgeline, which have lagged in recent months, were up 32.7 percent and 26.8 percent, respectively.

Perhaps because of hefty incentives on larger vehicles in the same showroom, sales of the Fit subcompact continue to dip; the Fit was off a substantial 23.5 percent in May and is down 19.1 percent for the year. And the once-heralded Insight hybrid is all but ignored, dropping 31.2 percent in May to just 1,913 sales, with a five-month sales total of an alarming 8,766.

May results were mixed at Honda's drifting Acura premium division. The entry-level TSX, which has intermittently struggled, posted a 13.9-percent gain, to 2,808 units for the month. But the now-best-selling TL slid 13.3 percent for the month, dragging it down 2.2 percent for the year, while the RL flagship skidded to just 151 sales in May, a 10.7-percent decline. So far this year, Acura has sold just 709 RLs.

Acura's MDX and RDX crossovers are jumping off depths from last year, posting respective 65.5-percent and 50.7-percent improvements compared to May, 2009. The new ZDX hatch-crossover contributed 305 incremental sales.

Nissan: Acquiring Momentum

Nissan ranked among the leaders of major OEMs in its relative sales results for May, reporting sales of 83,764 units, up 24 percent compared with year-earlier sales.

Nissan division sales rose 24 percent for the month while Infiniti division sales rose almost 25 percent.

Among vehicle highlights for Nissan were Rogue, which set a new May record with nearly 8,000 units sold. Versa sales rose 96 percent and Sentra 60 percent. Nissan's volume-leading Altima sedan saw sales rise 19 percent compared with a year earlier.

"The value, performance and style of those models are resonating well with consumers and driving our brand," said Al Castignetti, vice president and general manager of the Nissan division.

Meanwhile, the launch of the 2011 Infiniti M lent momentum to the brand's sales in the month, with the model up 62 percent over last May. The G lineup was up 24 percent (sedan by 17 percent, coupe by 43 percent).

"The key is consistent growth in all segments, which reflects Infiniti's ability to attract new buyers into our showrooms," said Ben Poore, vice president of Infiniti

 

Volkswagen AG: Volkswagen, Audi Set Records

Volkswagen AG, including the Volkswagen and Audi brands, sold 32,748 vehicles in the U.S. in May, up 21 percent from the year-ago May.

Volkswagen of America sold 23,543 vehicles for a 20-percent increase over May 2009. May was VW's 11th consecutive month of sales growth.

The Volkswagen Tiguan and Jetta SportWagen had best-ever months. Volkswagen sold 1,959 Tiguans, a 73-percent increase from a year ago, and 2,511 Jetta wagons for a 56-percent sales hike. Of the Jetta SportWagens sold, 86 percent were with diesel engines. Most other Volkswagen models experienced sizeable sales increases.

"Our strong May sales offer proof that customers are looking for clean, efficient transportation and that they have found it in Volkswagen," said Mark Barnes, Volkswagen of America COO.

Audi sold 9,205 units sold, up 23 percent from May 2009 and surpassing the previous monthly record set in May 2007. May marked third time this year for setting a monthly sales record and Audi's fifth-best sales month in history.

"We continue to see Audi gaining momentum as American consumers are evaluating the luxury car choices that offer substance, performance and exceptional efficiency," said Audi of America President Johan de Nysschen. "This isn't growth fueled by risky discounting strategies. It is growth based on providing the cars that are right for these times."

The Audi Q5 crossover set yet-another monthly sales record, and May was the best month so far this year for the Audi A4, Audi A4 Avant and Audi Q7, of which nearly a third were sold with diesel engines. Nearly half of all A3s were sold with diesel power.

For the year so far, Audi sales are up 34 percent.

Subaru: Outperforming Industry - Still

Subaru of America sold 23,667 vehicles in May - a hefty 35-percent increase over May 2009 sales of 17,505 vehicles. It was Subaru's best-ever May, beating the previous record of 18,436 vehicles sold in May 2008.

New monthly records were set again by the Subaru Outback (sales more than doubled from a year ago), Subaru Forester (sales up 29 percent from last May) and Subaru Legacy (sales up 19 percent). Impreza sales were about even with a year ago; Tribeca sales were off 66 percent.

"We have consistently been achieving sales records over the past two years," said Tim Colbeck, senior vice president of sales, Subaru of America, Inc. "That consistency shows the fundamental strength of the brand and reflects increasing awareness among buyers that our products provide a unique combination of safety, utility, performance and value."

For the year, Subaru already has surpassed the 100,000 mark with 104,359 vehicles sold, up 40 percent from the nearly 75,000 vehicles sold in the first four months of 2009.

BMW Group: Sales down 4%

BMW Group, including the BMW and Mini brands, sold 22,092 vehicles, dropped nearly 4 percent from a year ago, but still were the group's best month this year. Sales of both BMW and Mini brands were down from last year's dismal May: BMW sales were off 3 percent; Mini's were down 8 percent.

 "We continued to successfully manage through a difficult transition period prior to the launch of key, new high volume vehicles," said BMW of North America President Jim O'Donnell. "The good news is we're now in that launch window with the first of these products - the all-new 5 Series - entering the market this month."

Despite the upcoming arrival of the 5 Series, sales of other BMW models were also lower, including the 1 Series, 6 Series and 7 Series as well as the X3, which is being replaced later this year as well. Sales of the 3 Series, Z4, X5 and X6 were higher than a year ago.

BMW says the new BMW 5 Series kicks-off a model offensive that will replace about 60 percent of BMW's current model line-up with new products over the next 30 months.

At Mini, 20-percent lower sales of the Cooper and Cooper S hardtop dragged down overall Mini sales even though sales of the Cooper convertible and Clubman were up from a year ago.
Mini will double its product range from three to six vehicles beginning in 2011, the automaker said.

Year-to-date, the BMW Group has sold a total of 98,254 vehicles, up 5 percent from the same period in 2009.

Daimler: Mercedes Rise Offsets Smart Fall

Daimler AG posted a sales increase of 22 percent on the strength of the Mercedes-Benz brand and despite another fall-off of smart sales.

Daimler sold 19,871 vehicles in May. Of those, Mercedes-Benz sales accounted for 19,176 of them, for a 27-percent increase. Smart chipped in a mere 695 sales, down 41 percent from a year ago.

Sales of the newest generation Mercedes-Benz E-Class, now available as a wagon and convertible, rose 141 percent to 5,476 units, outselling Mercedes' usual best-seller the C-Class, which posted a 5-percent sales rise. Other sales increases came from the Mercedes S-, R, M-, GL- and GLK-Class. Sales were down for the CL, SL, CLK, SLK and CLS. The new halo supercar SLS AMG recorded 168 sales in May.

Year to date, Daimler has sold 87,970 new vehicles, an increase of 26 percent from a year ago.

Jaguar Land Rover: Jag Waiting for XJ

Jaguar Land Rover North America sold 3,671 vehicles, up 8 percent from the year-ago May.

Land Rover sold 2,709 SUVs, up 22 percent from last May. While Range Rover Sport remained the brand's sales leader with steady sales from a year ago, the re-designed LR4 had a 146-percent sales surge. Range Rover sales rose 179 percent.

Jaguar, awaiting the return of its XJ sedan to showrooms, sold 962 cars, down 18 percent from a year ago. The first 44 units of the 2011 Jaguar XJ arrived in May with more hitting dealership in June. Sales of the XF dropped 9 percent.

"Market demand for new products has proven to be robust this year with fantastic response to the updated Land Rover and Range Rover models," said JLRNA President Gary Temple.  "We look for continued momentum for Land Rover as well as a similar reaction in the Jaguar showrooms now that we have just begun deliveries of the new XJ, and will begin to have 2011 model year vehicles in stock."

On a calendar year to date basis versus 2009, Jaguar Land Rover North America sales are up 7 percent to 16,407 units. - Dale Buss, Contributing Writer; Bill Visnic, Senior Editor; Michelle Krebs, Senior Analyst and Editor at Large

Edmunds.com Analyst Ivan Drury contributed analysis to this report.

Photos by manufacturers

1. Buick LaCrosse

2. Chevrolet Traverse

3. 2010 Ford Fiesta

4. 2011 Ford Mustang

5. 2011 Jeep Grand Cherokee

6. Toyota Prius

7. 2010 Lexus CT 200h

8. Hyundai Tucson

9. Acura MDX

10. 2011 Infiniti M

Bill Visnic:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter