U.S. automakers Ford (F - Get Report) and General Motors (GM - Get Report) focused on profitability and sustainability in releasing January sales numbers that declined year-over-year but still point to a relatively encouraging auto sales environment.
Detroit-based General Motors said sales fell 3.8% year-over-year, while crosstown rival Ford reported a drop of 1% and Fiat Chrysler (FCAU - Get Report) registered an 11% decline. GM's numbers fell short of an Edmunds estimate for a 1.2% gain, while Ford and Fiat Chrysler beat expectations for a 2% and 15.3% decline, respectively.
Fiat Chrysler faced difficult comparisons with a strong January 2016 and has been focused on reducing its lower-margin rental fleet sales so expected to generate lower volumes.
Shares of Ford and Fiat Chrysler traded down less than 1% on Wednesday, while GM was down 1.5%.
Among other automakers, Nissan Motor and Honda Motor (HMC - Get Report) each reported 6% gains but Toyota TM said its sales dropped by 11%. Edmunds had forecasted a 6.6% jump for Honda and 2.4% gain for Nissan but expected Toyota (TM - Get Report) sales to be up 1.1% year-over-year.
Toyota group vice president Bill Fay in a statement said that "the industry in January took a bit of a pause." Toyota's decline can be traced to its Lexus division, which is weighed towards cars, and the company's traditional stance against aggressively adjusting incentives month to month.
January is typically the weakest month of the year for auto sales, and this January could have been particularly brutal had an unexpectedly strong December eaten into forward sales. Substantial year-end momentum helped the industry to a record-breaking 17.55 million U.S. sales in 2016.
The companies focused on profitability, and not total sales, emphasizing strong demand for higher-margin SUVs and trucks more than offsetting a decline in demand for cars.
"In early January, we focused on profitability while key competitors sold down their large stocks of deeply discounted, old-model-year pickups," Kurt McNeil, GM's U.S. vice president of sales operations, said in a statement. "We gained considerable sales momentum as we rebuilt our mid-size pickup, SUV and compact crossover inventories from very low levels following record-setting December sales."
Among GM brands Buick sales fell 28.2%, while Chevy and Cadillac declined slightly and GMC, its SUV brand, was up 1.1%. But not all cars were stuck in neutral. Notably, the Chevy Bolt, GM's new electric vehicle, had 1,162 deliveries despite only being available in two states.
Ford's Mark LaNeve, vice president of U.S. marketing and sales, said the new year brought "strong consumer demand" for the company's F-Series trucks, Lincoln models and SUVs. "This drove near-record company average transaction prices for Ford, up $2,500 versus a year ago and far outpacing the overall January industry increase of $550."
Ford said SUV sales climbed 7% and trucks were up 5.5%, but car sales were down 17.5% year-over-year.
The lukewarm results match analyst forecasts for 2017, with reasons for optimism including a healthy economy and a large number of aging vehicles on the road pushing up against growing inventories of used vehicles available for sale.
Increasing use of incentives could also threaten margins. Overall the average incentive on a new vehicle sale in January was $3,635, according to TrueCar's ALG, up 21.6% from a year prior. Jessica Caldwell, director of industry analysis at Edmunds, also notes that about 10% of all new car loans in January were offered at a 0% APR, compared to 8% of loans in January 2016.
The overall consensus forecast is that while auto sales might have peaked they are more likely to plateau than decline, and companies with strong offerings in higher-margin areas like SUVs should benefit.