Weakness in June Auto Sales Stokes Fears of Slowing Recovery

Weakness in June Auto Sales Stokes Fears of Slowing Recovery

By Michelle Krebs July 2, 2010

 

Auto executives across the country were trying to avoid saying so on Thursday, but clearly there is new fear afoot in the industry that the happy "moderate" recovery in the American market may be deteriorating into something much less cheery - like a potential second-half stagnation or even slide.

U.S. auto sales in June totaled about 983,000 units, a 15-percent increase over June 2009 sales. That translated into a Seasonally Adjusted Annualized Rate( SAAR) of sales of just 11.1 million light vehicles, ahead of June 2009's lowly 10.6 million.

But the beauty in those numbers was hardly even skin-deep. June sales actually declined by 10 percent from May in absolute terms.

The positive comparison with June a year ago also was unimpressive because that was one of the most horrific months in U.S. automotive history, coming in the midst of the bankruptcy filings by General Motors and Chrysler - and scaring off many would-be car buyers. And some of the few determined shoppers last June already were waiting for the commencement of the federal government's Cash for Clunkers program later in the summer.

The key disappointing indicator at this moment is that overall industry retail sales - peeling away the fleet business that has been propping up the Big Three for most of 2010 so far - were about even during the first half with the dismal first six months of 2009.

"Retail demand is just so weak, and people aren't feeling comfortable coming into dealerships now unless they're getting a strong bargain message as they did on Memorial Day weekend," which propped up May sales, said Jessica Caldwell, head of U.S. industry analysis for Edmunds.com.

The seasonal sales rate was the lowest since the pace of 10.3 million for February sales, Caldwell noted. "The industry has talked about recovery since then, so that number should be going up, not down," she said.

Hush Your Mouth

OEM executives acknowledged difficulties but nearly to a person denied that their fledgling recovery was endangered.

"We think the industry is on track for about 11.3 million units in 2010, roughly half a million short of earlier analyst projections," Hyundai Motor America President and CEO John Krafcik said, in one of the most candid assessments of the day. "That represents less than a million units of growth from 2009, with higher industry fleet sales accounting for the majority of that increase."

Similarly, Bob Carter, general manager of the Toyota division of Toyota Motor Sales U.S.A.,  in California, said, "We were anticipating overall gains in the economic climate, but those appear to be postponed. We anticipate they'll still appear in the third quarter and certainly in the fourth, but we haven't seen them materialize across the entire industry."

In Dearborn, Mich., Ford Chief Economist Emily Kolinski Morris conceded that June sales "were somewhat below expectations" but insisted that she still anticipates a "modest pace of growth" in auto sales for the rest of 2010 and even "a potential upside as conditions improve; and growth could accelerate from there."

Nearby, in Detroit, Steve Carlisle, General Motors' vice president of global product planning, said that "recent economic news continues to point to a reinforced slow recovery woith some volatility in it" and predicted that the market would "continue to boost vehicle sales, albeit modestly, as we move through the year."

But in Woodcliff Lake, N.J., Jim O'Donnell, president of BMW of North America, said that "economic improvement [in the U.S.] has been, and looks to continue to be slow this year."

Wilted Tea Leaves

The reason for all the uncertainty is clear: The U.S. light-vehicle market has lost some momentum, and there is no guarantee in a snapshot of the economic fundamentals - or the outlook for them - that auto sales actually will recover enough mojo to cross the finish line in December above the 11.5-million-unit level that would constitute a modest recovery.

Housing reports remain shaky; unemployment remains high; consumer confidence is up and down. And for the first time during this recovery cycle, OEM executives went out of their way to note some regional variations in sales. There was some widespread weakness in the Gulf states, for example - especially in the Houston market - presumably as a result of localized economic stagnation because of the BP oil spill and worries about Hurricane Alex.

But Toyota's Carter noted that there was "dramatic change" in Toyota's regional sales pattern in June, as the East Coast and Midwest were strong while not only the Gulf States but also the West region were lagging. He couldn't immediately explain it except to offer that lower gasoline prices was damping sales on the Pacific Coast of the Prius hybrid.

General Motors: Relying on Launches

General Motors reported sales of 194,200 units in June, up 37 percent from a year earlier - but down nearly 13 percent compared with May 2010. GM's results were its first year-over-year increase in June sales since 2005.

Executives noted that GM's retail sales increased 19 percent overall during the first half, posting gains even as a robust fleet business continued to buoy the company overall. June fleet sales comprised about 30 percent of overall business, which was down from 37 percent in May but still above the more typical share of 25 percent fleet sales that remains GM's cumulative target for the year.

New vehicles in the last year continue to drive GM's results. Sales of the magical seven - Chevrolet Equinox and Camaro, Buick LaCrosse and Regal, GMC Terrain, and the Cadillac CTS Wagon and SRX - combined totaled 222 percent higher through the first half than a year earlier. Even the darling of GM's new vehicles a year ago, Chevrolet Malibu, sold 22 percent more at retail in the firset half than a year earlier.

Pickup trucks were another relative bright spot for GM as for the industry. GM has been nudging its market share for the segment toward its desired 40 percent with strong incentives, and sales of its pickup models combined were up 21 percent in June and 12 percent for the entire first half.

"That's good news, because it's a significant part of our business, and the continuing increase is evidence that the economy is improving," Carlisle said. He predicted the pickup segment would continue to grow modestly for the rest of the year. GM's imminent launch of a new heavy-duty version of some of its pickup models should help the company's share, he said.

Ford: Riding Tailwinds

Ford sold 175,700 units in June, up nearly 18 percent from a year earlier but down 8 percent from May 2010. For the third straight month, Ford sales beat Toyota's, and each month the gap has widened. According to Edmunds.com analysis, Ford is well-positioned to grab the full-year second place in the U.S. market to GM.  First-half sales totaled 28 percent more than a year ago for Ford.

Even though the year is only half over, Ford executives already were tallying up some accomplishments. The company grabbed 16.8 percent  of the market for the first six months of 2010, a full 1.5 percentage points better than a year earlier - even though Ford made some strong gains in early 2009 as American consumers migrated to its products and away from government-assisted GM and Chrysler.

"Importantly, our market share gain was achieved while we continued to reduce incentive spending," said Ken Czubay, Ford's vice president of U.S. marketing, sales and service.

Still, Ford rode a strong fleet month once again, with fleet sales comprising a robust 42 percent of Ford's total. Czubay decided to embrace the silver lining in fleet sales - on which automakers don't want to get too dependent - by noting that higher-margin government and commercial sales were particularly strong, as contrasted with sales to daily-rental fleets.

Truck sales propelled Ford as they did other automakers. Ford's F-Series sales increased by 29 percent in June over a year earlier and, for the six months, by 34 percent. Car sales rose 16 percent in June and SUV sales rose 3 percent.

In fact, sales of Ford's new 2011 F-Series Super Duty truck were 58 percent higher than a year ago, marking the first time since 2000 that Super Duty had achieved a 50-percent share of F-Series sales. Ford's new Mustang notched sales in June that were 37 percent higher than a year ago.

Even Mercury got into the act. Probably because it's a soon-to-be-defunct brand, Mercury posted an increase of 1 percent in June sales, thanks to bargain shoppers.

Toyota: Unintended Deceleration

Toyota reported June sales of 140,604 units, nearly 7 percent over its year-earlier sales but down 11 percent from May 2010. Toyota finished he first half in third place in U.S. auto sales behind GM and Ford.

Toyota executives boasted that their company continued to sell the most vehicles at retail in the U.S. market of any OEM and was one of the few with a retail-share gain over the first six months.

Its stalwart sedans continued to post modest sales increases, with Corolla sales up about 10 percent for June compared with a year earlier, and Camry sales up about 8 percent in what Carter called "an extremely competitive midsize sedan segment."

As for some other automakers, Carter said, SUV and truck sales were the June bright spot for Toyota. Sales of its Tundra pickup were up about 50 percent in June over a year ago, for example. "And we could have sold more light trucks in June if we had them," Carter said. Toyota has begun production of a new version of its Tacoma light pickup in San Antonio and plans volume output beginning in July.

Sales of Toyota's RAV4 compact SUV were up by 31 percent for the first half.

Even the new version of Toyota's minivan, Sienna, is getting some traction despite the fact that it was introduced early this year just about exactly at the time Toyota was being overwhelmed by controversy over its sudden-acceleration safety recall. Edmunds.com analysis showed that Sienna in June nearly outsold long-time segment leader Town & Country, by Chrysler.

Carter said that Toyota would retain its relatively heft level of incentive spending that it began in March, to help consumers forget about its safety problems. Toyota has been easing off the incentive throttle a bit since then but can't remove the lures in the face of such a relatively weak sedan market.

He said that the company would be moving ahead its annual clearance-sale event to July from its usual place in August but that such a move was planned earlier and wasn't a reaction to the current sales environment.

Lexus sales were up only 3 percent over a year ago, a let-down from its performance earlier in the half.

Honda: Civic Wins Compact Sales Crown

American Honda, which includes the Honda and Acura brands, saw a 6-percent increase in sales in June, with 106,627 vehicles sold.

Honda division sales were up 4 percent to 95,788 vehicles with the Accord its top-selling model. The Civic was the best-selling compact car with 26,474 sold, up 26 percent from a year ago. Other models posting increases were the CR-V, up 17 percent, and Pilot, up 10 percent.

Honda redesigns its Odyssey minivans in the upcoming months and introduces the CR-Z sporty hybrid.

Acura sales saw a 31-percent hike, thanks to hefty sales increases on the MDX, RDX and TSX. Sales of the TL, however, declined.

Chrysler: Better This June Than Last

Chrysler reported June sales of 92,482 units, a 35-percent increase over June 2009, when it was in the midst of a bailout by Fiat and the U.S. government. Still, Chrysler experienced a 12-percent decline in sales compared with May 2010.

And Chrysler finally is giving itself some product news to talk about, which should help it going forward. Specifically, it began selling the new 2011 Jeep Grand Cherokee in June and plans full-volume availability in July. And Chrysler just introduced an all-new Ram Heavy-Duty pickup truck and Ram Chassis Cab.

Chrysler promises to be launching 16 all-new or refreshed products later this year that represent 75 percent of its model lineup, now that it is working with capital and development help supplied by its new Italian parent, Fiat SpA.

In the meantime, a new Grand Cherokee - the vehicle that arguably started the VUS craze in this country 20 years ago - was enough to crow about.

"Consumer buzz is building tremendously" around the arrival of the Grand Cherokee, said Fred Diaz, president and chief executive officer of the Ram brand and lead executive for U.S. sales.

Overall for the six months, Chrysler posted a 12-percent increase in sales compared with a year earlier. June marked its third month of year-over-year sales increases. 

Nissan: In Idle Mode

Nissan sold 64,600 units in June, up nearly 11 percent from a year ago but down a stiff 23 percent from May.  June marked the Nissan division's ninth consecutive month of year-over-year sales increases.

"We continue to see strength in Nissan's lineup of trucks and crossovers," said Al Castignetti, vice president and general manager of the Nissan division.

Nissan model vehicles sold 8 percent more in June than a year earlier. Versa was the pace-setting model, with deliveries up 24 percent for the month.

All truck models including crossovers and SUVs showed gains, led by Rogue, which set a new June record with 6,959 units sold.

Infiniti sales burgeoned by 32 percent over a year ago, with growth across its entire lineup.

Hyundai: Shattering Records Again

On track for a record year, Hyundai Motor America sold 51,205 vehicles in June, a 35-percent increase from a year ago.

On its march through June, Hyundai set new records: the highest June sales ever; the highest first-half sales ever; the highest monthly market share ever.

"June was a very tumultuous month for the industry with declining consumer confidence, housing market instability, and unexpected financial market volatility," said Dave Zuchowski, Hyundai vice president of national sales. " In the face of this adversity, we were encouraged that Hyundai continued to outperform the market and seize additional market share gains."

Hyundai's June success comes on the strength of its two new models. The automaker sold 17,700 Hyundai Sonata models, which only had a 49-percent sales hike largely because the plant in Montgomery, Ala., can't build them any faster. The new Hyundai Tucson, which had sales soar by 207 percent year-to-year. Genesis set a new sales record with a 40-percent increase. Sales for the old Elantra, which gets replaced late this year or early next, were up 119 percent. Hyundai also introduces the flagship Equus later this year.

For the year to date, Hyundai sales are up 25 percent. The automaker expects this year to sell more than 500,000 vehicles for the first time ever. However, Hyundai predicts a "challenging" second half and has scaled back its forecast for the year by a half-million units to 11.3 million.

Kia: Riding the Sorento Wave

Kia Motors America had its best-ever June with sales of 31,906 vehicles, a 13-percent increase over a year-ago June and surpassing the previous record of June 2008. It was also Kia's best-ever first half.

The revamped 2011 Kia Sorento led the charge for Kia with sales of 8,608 units in June, which was the sixth month in a row that the crossover was Kia's best-selling vehicle.

Kia introduces a new Sportage this summer followed by a new Optima. 

So far in 2010, Kia has sold 170,069 vehicles, up from 147,404 sold in the first-half of 2009.

BMW Group:  BMW Up, Mini Flat

BMW Group, including the BMW and Mini brands, sold 23,331 vehicles for a 12 percent increase and the company's best sales month this year.

BMW brand sales improved 15 percent to 19,182 vehicles sold in June. The new BMW 5-Series helped boost the lines sales by 40 percent; X5 sales were up 44 percent and 7-Series sales soared 113 percent.

Mini sold 4,149 cars, a scant 1 percent increase over last year. Mini convertibles were the hot sellers with an increase of 35 percent over a year ago.

Mazda: Higher Sales Across the Board

Mazda North American Operations reported 33-percent sales increase for June, with 18,238 vehicles sold.

Nearly every model posted a significant increase: Mazda 6 up 84 percent to 3,388 units; Mazda3, up 29 percent to 8,555 units. Even the MX-5 Miata, which had been in a sales slump, had a 24-percent increase to 638 units sold. Similarly, the CX-7 and CX-9 crossovers posted sales hikes, 70 percent and 35 percent, respectively.

Sales of the Tribute, B-Series truck and RX-8 continued to fall.

Volkswagen: Golf, Jetta SportWagen Boost Sales

Volkswagen of America sold 21,051 vehicles in June, 11 percent increase over June 2009, and its 12th consecutive month of sales growth.

The Golf posted its strongest month ever with 1,570 units sold, a 187-percent increase compared with June 2009. The Golf TDI had its best-ever month. Other models with strong sales included the Jetta SportWagen, up 27 percent. The Passat Wagon had its best month since December 2008 for a 204-percent hike from a year ago.

For the first half, Volkswagen sold 126,012 vehicles for a 30-percent increase over the first half of 2009.

Audi: First-Half Record

Audi of America sold 8,601 vehicles in June, a 14-percent increase from a year earlier. That pushed first-half sales to 48,440 - the most Audi has ever sold in a first half of the year, breaking the previous 2007 record.

"We are very optimistic that 2010 will wind up as the best year Audi has ever enjoyed in the U.S. market," said Audi of America President Johan de Nysschen. He added that Audi sales would be higher if it had more inventory.

Audi A3 sales soared 83 percent from a year ago. Audi Q5 sales climbed 48 percent. And Audi A6 sedan sales gained 20 percent. A5 sales soared 121 percent.

In terms of diesels, 53 percent of the A3s that Audi sold were TDI, outpacing the expectation that the mix would be 20 percent diesel. And 37 percent of Audi Q7 sales were from TDI, a percentage that could have been higher had more diesels been available, Audi said.

While A4 remains Audi's volume leader, its sales were off 14 percent.

Mitsubishi Drops in June, Sees Flat First Half

A 3.8-percent sales decline was Mitsubishi Motors North America's payoff in June, with sales totaling 4,198 units for the month. The result did not, however, keep struggling Mitsubishi from pushing into the red - barely - for the first half of 2010 when compared with the same period last year, with the company eking out a 0.10-percent improvement for the first six months.

Sales were led by the Lancer compact-car line, which improved 16.7 percent compared with last June. The company said it was the Lancer's best month since the Cash-For-Clunkers boosted August, 2009.

The Outlander crossover, which recently added a new Sport variant, jumped 38 percent compared nd half of the year, with the addition to our product line-up of our exciting new Outlander Sport CUV." And the Eclipse Spyder posted a  healthy 45-percent gain.

MMNA President & CEO Shin Kurihara said, "We are perfectly positioned to show much larger increases the second half of the year, with the addition to our product line-up of our exciting new Outlander Sport CUV." 

Jaguar Land Rover:  Best Month of the Year

Jaguar Land Rover North America enjoyed its best month of the year in volume and percentage increases in June.

The automaker sold 2,790 vehicles for a 53-percent increase over June 2009. Land Rover sales were up 44 percent; Jaguar sales finally had a positive percentage change - up 73 percent.

"June was the first month we have had all of our new models from both brands in the dealerships and the results were excellent," said JLRNA President Gary Temple. "For the first half of the year, Jaguar Land Rover North America has registered a solid increase in the face of a still challenging economy and aggressive competition."

June was the first full month of 2011 Jaguar XJ sales.  In June, the automaker began offering Jaguar Platinum Coverage, which includes an enhanced warranty and free maintenance plan. The redesigned 2010 Land Rover LR4 saw sales double from last June.

Suzuki Drops 5 Percent Despite Kizashi Gains

American Suzuki Motor Corp. can't seem to catch a break - sales in June were off 5 percent (2,035 vehicles sold) compared with the weak June of 2009, and for the first half, Suzuki posted just 11,549 total sales, a 48-percent slide from last year.

The bright spot definitely is Suzuki's well-reviewed Kizashi midsize sedan, whose sales indicate the all-new model seems to be gaining momentum in the market. The Kizashi reached 717 buyers in June, which was 51 percent better than May's results. And the Kizashi suddenly is challenging the SX4 compact-car lineup as the company's best-selling car; SX4 sales in June were 828, which represented a 27-percent drop compared with last June.

Without the added volume from the new Kizashi, it's difficult to say where Suzuki might be: first-half sales for every one of its models are down by heavy double digits compared with the first half of 2009. The SX4 is off by 45 percent, the Grand Vitara crossover is down 44 percent and the Equator midsize pickup is down by 31 percent.  -- Dale Buss, Contributing Writer; Bill Visnic, Senior Editor, Michelle Krebs, Senior Analyst and Editor at Large

Edmunds.com Analyst Ivan Drury provided the sales analysis for this report.

 

 

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