Motor Vehicle Sales Flat, Hope Turns to Second Half: What About Fleet Sales? Incentives?
Reuters reports Detroit, Investors Cheer Flat May U.S. Auto Sales.
U.S. automakers on Thursday reported flat May sales after two months of declines, and that was enough for investors to bid up shares of General Motors Co (GM) and Ford Motor Co (F).
GM and Ford executives expressed hope that consumer demand for new cars and trucks will stabilize in the second half of 2017, and said inventories of unsold cars will decline. Yet analysts warned that carmakers may have to continue heavy discounts or slash production due to issues ranging from rising interest rates to a glut of used cars.
GM said it had been trimming sales of heavily discounted vehicles to car rental companies. Such fleet sales made up about 19 percent of its total sales in May.
In an interview, GM Chief Economist Mustafa Mohatarem said the sliding value of used cars has discouraged automakers from offering deep discounts on new vehicles to rental car companies. Hertz, Avis and other rental companies either will have to pay higher prices, he said, or automakers will cut production further in hopes of supporting used-car resale values.
Ford’s fleet sales rose 8.4 percent, representing more than 34 percent of total sales. The industry average is around 20 percent.
Manufacturers and dealers “really pushed the deals over the holiday weekend to prop up their May numbers,” said Jessica Caldwell, executive director of industry analysis at Edmunds, the car shopping website.
The above chart is from last month. Final numbers are still not in. Mentally add another dot in approximately the same place.
Ford Tops GM, Incentives Up
A big surprise this month was Ford Outsells GM.
Although it’s probably a temporary blip, Ford outsold cross-town rival GM by nearly 4,000 units in May, making it temporarily the largest automaker in the U.S. market. It was the first time Ford outsold GM since March 2016, which was the first time that had happened since March 2011.
The company’s 2.2% sales increase in May, fueled by strong sales of sport-utility vehicles and pickup trucks, inspired some fresh confidence. Ford stock increased 2.9% after the report to $11.44 at 10:31 a.m.
Despite GM’s unexpected sales decline of 1.3%, the company also enjoyed a stock boost. GM shares were up 2.2% to $34.67.
Incentives are enticing consumers to take the plunge. For example, dealers boosted auto financing incentives by 33%, compared to a year earlier, Edmunds.com analyst Jessica Caldwell said in a report.
To achieve flat overall sales, incentives were up 33% from a year ago.
Fleet sales at Ford rose 8.4 percent, accounting for over 34 percent of total sales.
If GM will not offer price cuts to dealers because of used car prices, it appears Ford will.
Mike “Mish” Shedlock