Ford sales slip on lower car, fleet volume

January U.S. new-vehicle deliveries fell 5.6 percent at the Ford division and 27 percent at Lincoln. Photo credit: DAVID PHILLIPS

UPDATED: 2/1/18 9:33 am ET

General Motors, behind strong fleet shipments, and higher truck and crossover demand at Chevrolet, posted a 1.3 percent rise in January U.S. sales. Volume rose 5 percent at Chevrolet and 4 percent at Buick but dropped 11 percent at GMC and 3.9 percent at Cadillac.

GM said retail deliveries dipped 2 percent last month while fleet sales rose 16 percent, with combined commercial and government deliveries rising 44 percent and daily rental volume off 7 percent.

U.S. sales of the Chevrolet Equinox, Traverse, Trax and Bolt EV each set January records. Demand for the Colorado pickup spiked 25 percent and Silverado volume jumped 15 percent.

Ford Motor Co., snapping a four-month streak of gains, posted a 6.5 percent decline in U.S. sales in January behind a 23 percent decline in car volume and a 12 percent drop in fleet shipments.

Deliveries fell 5.2 percent at the Ford division and 27 percent at Lincoln, Ford said today. 

In addition to the decline in fleet volume, Ford said retail sales dropped 4.3 percent last month.

When other automakers report results later today, analysts expect U.S. light-vehicle sales to dip in January. The month is historically the weakest period of the year for industrywide volume.

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Severe cold temperatures across large swaths of the country also chilled showroom traffic, analysts say.

Edmunds sees deliveries dropping 1.4 percent even with higher deals compared with January 2017, though incentives dropped from December levels.

Sales last month continued to be driven by healthy light-truck demand, notably crossovers, while car and fleet volumes remained weak.

Low interest rates and gasoline prices, steady job gains and lofty U.S. equity markets also are supporting industry sales, automakers and analysts say.

The U.S. new-vehicle market, after seven straight annual gains capped by a record 2016, dropped 1.8 percent to 17.245 million last year.

While tax reform is expected to provide a lift to U.S. sales, analysts say rising interest rates will counter any gains in 2018.

Overall, U.S. sales are forecast to drop below 17 million for the first time in three years, with most 2018 estimates from analysts ranging from 16.7 million to 16.9 million.

AutoNation Inc., the nation’s biggest dealership group, today projected new light-vehicle deliveries will total 16.8 million this year.

“The marginal expected year-over-year contraction will be caused by the reduced availability of auto credit, falling used-car prices, rising interest rates, and less favorable lease options for consumers,” S&P said in a report this month.

“There’s a lot of good economic news to support an optimistic view of automotive sales this year,” said Charlie Chesbrough, senior economist for Cox Automotive. “Record equity markets, low unemployment, strong consumer confidence – a recipe for robust vehicle demand. And the recent passage of tax reform will only add additional support.”

But Chesbrough says the industry also faces several headwinds in early 2018, notably reduced incentives “from recent levels as year-end clearance sales end.” Off-lease vehicles at dealerships after the fall’s pull-ahead programs will also capture some new-vehicle buyers, he says.

SAAR outlook

Analysts polled by Bloomberg expect the seasonally adjusted sales rate for January to come in at 17.1 million, down from 17.43 in January 2017 and December’s 17.86 million rate. GM today estimated the January SAAR will come in at 17.4 million units.

Company outlook

Ahead of today’s reports, sales were projected by analysts polled by Bloomberg to rise at most major automakers: 3.4 percent at General Motors, 9 percent at Toyota Motor Corp., 2.5 percent at Honda Motor Co., 2.1 percent at Nissan Motor Co., 1.3 percent at Hyundai-Kia and 5.2 percent at Volkswagen-Audi. January volume was forecast to fall 1.5 percent at Ford Motor Co. and 10 percent at FCA US.

Spiffs

The average new-vehicle incentive was tracking at $3,733 in the first few weeks of January, J.D. Power says, and was expected to set a record to start a year. ALG estimates the average new-vehicle incentive rose 9.8 percent to $3,812 in January compared to January 2017. (See chart below.) “Incentives continue to be a struggle, with automakers once again eclipsing the 11 percent mark in incentive spending as a percentage of average transaction price,” said Eric Lyman, ALG’s chief industry analyst.

A boost from tax reform?

Some analysts believe large pickups could be a beneficiary of recent U.S. tax reform. The legislation allows businesses filing as pass-through entities — including sole proprietorships and partnerships — to deduct up to 20 percent of qualified business income. “With construction and related small businesses active in the pickup market, the net result should improve the after-tax earnings of some small business owners — which could boost pickup sales for their small fleets,” Barclays analyst Brian Johnson said in a note to investors this week. “In addition, under the new tax act commercial fleets can likely enjoy faster depreciation schedules, further supporting pickup sales.”

 2005.”

Odds & ends

There were 25 selling days last month vs. 24 in January 2017 … Kelley Blue Book says average transaction prices for new vehicles rose nearly 4 percent to $36,270 in January from January 2017 as the shift from cars to light trucks becomes “particularly extreme lately.” In the midsize car segment, average transaction prices rose 3 percent to $25,865 in January, largely reflecting the redesigned Toyota Camry and Honda Accord … J.D. Power says days to turn, the average number of days a new vehicle sits on a dealer lot before being sold to a retail customer, was 71 through Jan. 21 … Light trucks accounted for 67 percent of U.S. light-vehicle deliveries in the first three weeks of the year, the highest level ever recorded in January … Among major automakers, FCA is still looking for its first monthly sales gain, year over year, since Aug. 2016 and Hyundai-Kia hasn’t posted a monthly gain since Nov. 2016 … Incentives, expressed as a percentage of sticker price, stood at 10 percent in early January, matching or exceeding the 10 percent threshold for the 18th time over the last 19 months, J.D. Power says.

Quotable

“Optimism for a solid 2018 seems to be growing,” said Jeff Schuster, head of forecasting at LMC Automotive. “Most variables are aligned favorably, with the majority of that positive weight being carried by an expected boost in the economy. The tax cut is expected to help drive the economy toward the 3 percent growth level, which we haven’t seen since

January incentive outlays for U.S.

Manufacturer Jan. 2018 Forecast Jan. 2017 Dec. 2017 Percentage change vs Jan. 2017 Percentage change vs Dec. 2017
BMW (BMW, Mini) $4,766 $4,032 $5,349 18% -11%
Daimler (Mercedes-Benz, Smart) $4,949 $4,465 $5,174 11% -4.4%
FCA (Chrysler, Dodge, Jeep, Ram, Fiat) $4,379 $4,219 $4,336 3.8% 1%
Ford (Ford, Lincoln) $4,421 $4,144 $4,431 6.7% -0.20%
GM (Buick, Cadillac, Chevrolet, GMC) $5,242 $4,587 $5,548 14% -5.5%
Honda (Acura, Honda) $2,063 $2,095 $2,087 -1.5% -1.2%
Hyundai $3,047 $2,176 $3,097 40% -1.6%
Kia $3,413 $3,366 $3,447 1.4% -1%
Nissan (Nissan, Infiniti) $4,370 $3,993 $4,572 9.4% -4.4%
Subaru $1,284 $966 $1,257 33% 2.1%
Toyota (Lexus, Scion, Toyota) $2,430 $2,212 $2,778 9.8% -12.5%
Volkswagen (Audi, Porsche, Volkswagen) $3,617 $3,418 $3,774 5.8% -4.2%
Industry $3,812 $3,472 $3,968 9.8% -3.9%
Source: ALG

Source: ALG