US Auto Sales July – Japanese Continue to Outperform
US auto sales fell 7% YoY to 1.415mil vehicles in July, with light truck sales down 2.5% YoY and passenger car sales falling by 13.8% YoY. SAAR (numbers restated on August 1st for seasonal factors by the Bureau of Economic Analysis) seems to have levelled off below 17mil units, with 16.77mil in July (16.7mil in June). Lower replacement demand, lower fleet sales, higher interest rates and increasing competition from cheaper second-hand cars continued to weigh on the auto market. DSR-adjusted (July ’17 25 days, July ’16 26 days), the result was not quite as bad, with sales down 3.3% YoY. However, automakers must start to be concerned about the weaker performance of light trucks, showing a clearly deteriorating trend, with YTD sales growth of only 3.5% YoY (2016: +7.2% YoY).
Among mainstream brands, only Japanese assemblers managed to post increases, with Toyota, Subaru and Mitsubishi Motors reporting positive sales growth. While Nissan, Mazda and Honda saw sales declines, these were below the industry’s average. One of the reasons for the weaker performance of the Detroit 3 were their efforts to cut down fleet sales (to retain profitability and stem residual value losses) as well as trying to keep inventory levels manageable. While we believe that the downturn is inevitable and will continue, we get the impression that automakers are handling the weaker demand better than in previous periods, trying to focus on profitability rather than volumes – at least for the time being. Nevertheless, incentives continued to rise (+7.8% YoY in July, according to J.D. Power, or +4.7% YoY according to ALG estimates), but are currently partly offset by higher average transaction prices. After years of rising transaction prices, we could start to see a stagnation this year, or even a first decline if demand for light trucks continues to weaken.
Toyota Motor is an automobile manufacturer. Co. is primarily engaged in the design, manufacture, and sale of sedans, minivans, compact cars, sport-utility vehicles, trucks and related parts and accessories throughout the world. Co. provides financing, vehicle and equipment leasing and certain other financial services primarily to its dealers and their customers to support the sales of vehicles and other products manufactured by Co. Co.'s principal business segments are automotive operations, financial services operations and other operations. Co. sells its vehicles in approximately 190 countries and regions, and markets for its automobiles in Japan, North America, Europe and Asia.
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