Automakers reported a significant slowdown in sales of cars and light trucks in May, in yet another sign that the yearlong rise in interest rates is finally starting to cool the spending habits of American consumers.
May sales figures from the "Big Three" automakers Thursday indicate the car industry, which in recent months has shattered sales records with fuel from the U.S. economic boom, may be running out of gas.
The slowdown in sales was exemplified by figures from
, the world's largest automaker, which produces Chevrolet, Oldsmobile, Cadillac, Buick, Saab and Saturn. Detroit, Mich.-based GM reported that its sales dropped 5.8% year-over-year in May to 455,868 vehicles, following April's 2.2% increase.
, which makes Ford, Mercury, Lincoln, Jaguar and Volvo vehicles, fared better, reporting a 1.4% increase in May sales to 416,660 -- the largest level since 1978. But that's a far cry from the 12% sales growth in April and 10.5% in March.
, which makes Dodge, Plymouth, Jeep and Chrysler in the U.S., reported that its total domestic sales fell 18% year-over-year to 226,348. That drop came even as Chrysler set a new sales record. DaimlerChrysler's figures do not include sales of its Mercedes-Benz, which is made in Germany.
"The industry is starting to see some moderation from the blistering sales pace we've seen in recent months," said Bill Lovejoy, group vice president of North America vehicle sales and marketing at GM.
Economists say the slowdown in sales of cars and light trucks is likely another sign that higher financing rates, and to a lesser extent the drop in stocks, have put a chill on Americans' big-ticket buying patterns. As auto sales surged in the first quarter and March, the industry looked on track to shatter 1999s record annual sales pace of 17 million vehicles. While many analysts still think that total sales in 2000 will still beat 1999, estimates of just how many more cars will be sold are starting to get smaller.
"It looks now like some consolidation in auto sales is appropriate, given the fact that we've had such strong sales for so long," said Carol Stone deputy chief economist at
in New York.
Stone said several factors are likely cooling sales growth, but the most influential factor is interest rates, which have risen steadily over the past year as the
has tried to bring booming economic growth to a more manageable level. "Financing can play a big role in people's car-buying decisions," Stone said.
But other factors are also at play, she said, including the rising cost of gasoline. In addition, some analysts say that following so many strong months of sales, the new-car market may have hit saturation, having satisfied its demand.
Still, despite the higher cost of gasoline, Americans continue to show an obvious affinity for gas guzzlers like light trucks and sport utility vehicles rather than more economical cars. Trucks, which include vans, sport utility vehicles, pickup trucks and other large vehicles, accounted for roughly 57% of the companies' total vehicle sales.
At GM, sales of sport utility vehicles jumped, led by a sharp rise in the Cadillac Escalade, known as one of the most decadent and luxurious models in the industry. DaimlerChrysler posted record sales of sport utility vehicles and Ford posted a sharp increase in some of its popular sport utility vehicles including its Explorer model.
In response to what might become even slower sales in the months ahead, auto makers are likely to try and spur business through greater incentives, rebates and other special offers.
DaimlerChrysler led the pack to try and lure buyers, after the company started a new rebate program Thursday which offers up to $2,000 back on minivans, Dodge Ram pickups and Dodge Durango sport utility vehicles. General Motors recently raised some rebates by $500 in some parts of the U.S. for the Memorial Day weekend, and might announce other incentives in coming weeks.
Other preparations for slower sales are likely to take the form of production cutbacks. Ford said it will cut production on its biggest sport utility vehicle, Excursion, by 25% in August because of weak demand, while GM plans to lay off 490 workers at its Saturn plant in Wilmington, Del.
GM shares closed down 13/16, or 1.1%, at 69 13/16. Ford shares finished up 15/16, or 1.9%, at 49 1/2. Shares of DaimlerChrysler closed down 7/16, or 1%, at 53 1/2.