US auto sales rebound 7% in June but fall short of forecasts

By David Phillips, Crain News Service (AN)

Detroit, Michigan - US auto sales increased 7 percent in June as a rebound from May's decline was tempered by sharp declines at earthquake-hampered Honda and Toyota.

Sales at those two Japanese auto makers fell 21 percent, while Subaru dropped 8 percent from year-earlier levels. Every other major auto maker advanced at least 10 percent.

Detroit auto makers captured more than half of industry sales last month-50.1 percent-for the first time since February 2008.

June's seasonally adjusted annual sales rate fell to 11.43 million units - the lowest mark since June 2010, when the Seasonally Adjusted Annual Rate (SAAR) hit 11.15 million. The performance was well short of forecasts in the 12 million range.

“The industry's inventory problems-real or perceived-as well as economic worries produced a speed bump last month, and it's a major bump,” said TrueCar analyst Jesse Toprak.

The SAAR had topped the 12-million level for seven straight months-the last three of those above 13 million-before shoppers scaled back in May, when total sales fell for the first time in nine months.

Rising gasoline prices, reduced incentives, higher prices and vehicle shortages caused by the March earthquake in Japan prompted May's decline.

Those factors contributed to June's lackluster results as well.

J.D. Power and Associates reported earlier this week that showroom traffic dropped in the third week of June.

“The month closed weaker than anyone expected,” J.D. Power analyst Jeff Shuster said. “Some consumers are waiting in anticipation of July 4 holiday deals. Other consumers remain on edge given all the negative variables out there.”

While US light vehicle sales are expected to continue rebounding, more auto makers are striking a cautious tone about the industry's outlook.

“There are some consumer confidence issues,” Al Castignetti, brand chief for Nissan, told The Wall Street Journal. “I didn't see the traffic in the showrooms I expected [to] but I think it will be better in July and August and throughout the year.” Sales of Nissan and Infiniti models rose 11 percent last month.

Many consumers remain in a cautious mood because of weak income and job growth, as well as the housing slump. Higher vehicle prices and fewer deals may also be deterring some buyers, analysts say.

“Even though the economic news remains pretty mixed, [and] even though the Japanese competitors have lower-than-normal levels of inventory, there's still this high pent-up demand that's backstopping the industry,” said Don Johnson, head of GM's US sales operations.

Sales rose 11 percent at GM last month, with car demand climbing 28 percent and pickup truck volume up 15 percent. Ford Motor Co. said sales increased 10 percent from a year earlier, when Volvo and Mercury were included in the auto maker's results.

Robust demand for Jeeps and a 35 percent jump in Ram truck sales helped the Chrysler Group's June volume advance 30 percent.

Kia led the biggest brands with a 41 percent gain, while Hyundai advanced 16 percent.

Toyota and Honda, meanwhile, continued to struggle with inventory shortages three months after an earthquake in Japan disrupted output.

Toyota's 21-percent decline followed a 33-percent drop in May. Lexus was off 38 percent, and the Toyota Division was down 19 percent. “June marked a significant turning point for Toyota as sales moved up over last month,” Don Esmond, head of Toyota Motor Sales US, said in a statement. “Toyota dealers now have a good supply of cars and trucks, and that selection is growing everyday.”

Sales of Volkswagen brand models jumped 35 percent. Subaru fell for a second-straight month for the first time since early 2009.

General Motors Co.'s retail sales rose 16 percent, offsetting a 1 percent decline in fleet shipments. But crossover demand-a bright spot for GM in recent months-fell 2 percent as the auto maker dialed back on rental deliveries.

Chevy, Buick and GMC advanced while Cadillac fell.

The drop in gasoline prices last month helped lift pickup sales, GM said.

As long as gas prices don't jump “dramatically,” Johnson expects pickup sales to strengthen in the second half of the year.

“As people got over the fear of fuel-price spike, those who actually need a pickup have come back into the market,” he said. “We think it's reasonable to assume that will play out for the rest of the year.”

Sales of the new Ford Focus jumped 41 percent, and the Fiesta subcompact posted 5,535 sales, Ford said. Sales of the F-Series pickup rose 7 percent, helped by demand for models equipped with V-6 engines.

At Lincoln, which had suffered six straight monthly declines, sales rose 17 percent.

US light vehicle sales are up 13 percent through the first six months of the year as the industry continues to climb back from the collapse of 2008-2009.

Consumers continue to shift to smaller, fuel-efficient models.

Volkswagen said June sales of the Jetta compact surged 88 percent, and diesel-equipped models accounted for 21.3 percent of the VW brand's volume. Chevrolet sold 24,896 Cruze compacts last month, with sales of the more fuel-efficient Eco model representing 17 percent of Cruze volume. Demand for the new Fiat 500 rose 3 percent from May, Chrysler reported.

And Honda said sales of the subcompact Fit increased 20 percent to 4,912 units.

The company's overall decline was balanced-with the Honda brand off 22 percent and Acura down 20 percent.

The Honda marquee was also hurt by a 36 percent drip in Civic sales. While both models are assembled in North America, demand for the Accord plunged 39 percent and Odyssey minivan sales dropped 25 percent.

At Nissan's Infiniti unit, which relies on Japanese plants for the bulk of its US lineup, June sales dropped 24 percent.

“We hit our lowest inventory level at our retailers during the month of June, but our factories are now at full production,” Ben Poore, head of Infiniti Americas, said in a statement.

From Tire Business / Automotive News (A Crain publication)