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News18 » Auto
3-min read

US Car Sales Struggle in May Despite Record Discounts

The industry sold six percent fewer vehicles than in April and one percent fewer than in May 2016, with a total of 1.5 million vehicles

AFP Relaxnews

Updated:June 5, 2017, 5:18 PM IST
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US Car Sales Struggle in May Despite Record Discounts
Total sales last month fell to a seasonally-adjusted annual rate of 16.58 million units, compared to 17.17 million a year ago, Autodata reported. (Photo: AFP Relaxnews)

Automakers offered big discounts over the Memorial Day holiday, but the response from US car buyers in May was not enough to reverse months of sales declines.

After seven years of gains, there were further signs US car sales have plateaued, analysts said.

Monthly sales data showed the industry sold six percent fewer vehicles than in April and one percent fewer than in May 2016, with a total of 1.5 million vehicles, according to Autodata.

The disappointing numbers were despite heavy incentives to lure buyers into showrooms and even as truck and SUV sales surged.

Total sales last month fell to a seasonally-adjusted annual rate of 16.58 million units, compared to 17.17 million a year ago, Autodata reported.

The biggest US carmaker, GM, saw its sales fall 1.3 percent last month compared to the year-ago period, while the North American arm of Fiat Chrysler (FCA US) saw a one percent decline, and Toyota sales fell 0.5 percent.

Ford reported a 2.2 percent increase, but it was attributable to more fleet sales, purchases by companies and government agencies, rather than consumer purchases from dealer lots.

Nissan sales rose three percent as it offered deep discounts, including a $10,000 incentive on its Titan truck and zero percent financing on a number of other models, according to industry analyst Michelle Krebs of Autotrader.

Other car companies also offered big discounts to encourage consumers to buy. Average incentive spending reached $3,583 per vehicle, a record for May, according to the research firm JD Power.

As the industry enters the busy summer selling season, dealerships will be trying to clear out older inventories as 2018 models debut, so continued aggressive pricing is likely, Krebs said.

"We anticipate we'll see more of that," she said, adding that carmakers also were likely to slow production.

- SUVs 'leading the way' -The good news was the American consumer's strong appetite for SUVs and light trucks were growing unabated, and that category accounted for almost two-thirds of all cars sold in May, according to JD Power.

"Although down from last year, the auto industry is still enjoying a solid year in 2017, with light trucks continuing to shine," said Jack Hollis, Toyota division's US chief.

"We continue to see the SUV segment leading the way," he said in a statement.

Truck and SUV sales jumped 12.4 percent at Toyota this May compared to last, and GM reported retail sales of its crossover vehicles surged 19 percent. FCA US said it sold 16 percent more Ram pickup trucks.

Ford not only sold 12.8 percent more F-Series pickups, it did so with the average transaction price of those vehicles up $3,300.

Thanks to strong consumer demand for more expensive, large vehicles, consumers likely spent about $38.4 billion on new cars in May, up about $1 billion from last year, and a record for the month, according to a forecast by JD Power.

Still, analysts predict a challenging road ahead for automakers, with used car prices dropping as more and more recently-leased vehicles return to dealerships.

"There's been a steady, yet not insignificant rise, in off-lease volume," said Kelley Blue Book analyst Alec Gutierrez.

Interest rates also are expected to rise over the next couple of years, even as increasingly technology-heavy vehicles raise sticker prices. More consumers are taking out car loans with terms stretching 72 months or longer.

"Flat sales are not bad, considering where we are," Krebs said, noting that it is hard to compete with multiple years of record-breaking numbers.

In a sign of the pressures facing the American car industry, Ford last week ousted its CEO Mark Fields, as the company's stock declined amid concerns over how new technology are changing the market.

Also last week, US environmental regulators sued Fiat Chrysler, accusing the company of installing devices on its trucks to hide harmful emissions during testing.

Volkswagen, recovering from its own diesel emissions cheating scandal, sold 4.3 percent more cars this May compared to last. Bucking the industry trend, its Jetta sedan was its most popular model, accounting for about a third of the 30,014 vehicles sold.

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| Edited by: Manav Sinha
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