DETROIT -- U.S. auto sales, led by Chrysler Group’s 20 percent advance and solid gains of 10 percent or more at Toyota Motor Corp., Nissan Motor Corp. and Ford Motor Co., rose 9 percent in July to 1.435 million.
The results were just below forecasts for a 10 percent increase but signal U.S. consumers remain in a buying mood, though many shoppers are being enticed with fatter discounts, automakers and analysts said.
“The economy has bounced back strongly from the harsh winter, consumer confidence has reached a post-recession high, energy prices remain moderate and job growth continues,” said Kurt McNeil, head of U.S. sales operations for General Motors. “The stage is set for strong sales through the balance of the year.
The seasonally adjusted, annualized sales rate hit 16.5 million in July. That is short of the 16.7 million forecast compiled by Bloomberg and up from 15.8 million a year earlier, but down from the revised 16.9 million rate in June.
The SAAR has topped 16 million units five straight months now.
In addition to Chrysler’s double-digit percentage gain in July, sales rose 12 percent at Toyota, 11 percent at Nissan and 10 percent at Ford.
While there are signs the pace of growth is slowing, the industry remains on track to post sales of around 16.3 million in 2014.
It would be the fifth consecutive year of growth and biggest year for U.S. auto sales since 2006, when deliveries totaled 16.6 million units.
Through July, U.S. car and light truck sales have advanced 5 percent to 9.6 million.
Among major automakers, GM, Ford, Honda, Hyundai-Kia and VW Group have lost share, while Toyota, Chrysler and Nissan have gained ground this year through July.
Fleet drives GM
GM, despite another round of recalls last month, said deliveries rose 9 percent, with fleet shipments up by 14,093 units, or 31 percent. GM’s retail sales edged up nearly 8,000 units, or 4 percent.
Cadillac was the only GM brand to post a sales decline in July. Deliveries at Chevrolet, GM's biggest division, climbed 8 percent.
Sales of light trucks, notably SUVs and crossovers, drove the industry gains last month with a 14 percent increase. Car demand rose 5 percent. Trucks and SUVs have now outsold cars for 11 straight months, the longest such stretch since a 31-month streak ended in August 2005, Edmunds.com said today.
Toyota, behind a 17 percent jump in light truck volume, reported combined sales of 215,802 Scion, Toyota and Lexus models. And Lexus won the monthly U.S. luxury title with 27,333 vehicles sold -- a 19 percent gain -- ahead of Mercedes and BMW.
Toyota also outsold Ford last month by 4,335 units.
“Rising consumer confidence, coupled with momentum in the marketplace, boosted auto sales in July,” said Bill Fay, Toyota division group vice president and general manager.
GM’s light truck sales rose 12 percent and crossover volume jumped 26 percent, but car deliveries slid 4 percent.
Honda Motor Co.'s sales slipped 4 percent last month on weaker light truck demand at the Honda brand, despite record July deliveries of the CR-V, and a 55 percent decline in Acura car volume. Overall sales dipped 2 percent at the Honda division and 18 percent at Acura.
Honda was the only major automaker to cut incentives from June to July, with per-vehicle discounts averaging $1,754, according to J.D. Power and Associates.
Ford said deliveries rose 9 percent at the Ford division and 14 percent at Lincoln. Ford’s retail sales totaled 162,028, up 7 percent. Escape SUV sales soared 19 percent to its best July ever.
Chrysler streak rolls on
Robust deliveries of the new Jeep Cherokee and other trucks -- as well as hefty incentives on older models -- propelled Chrysler Group’s results.
It was the best July for Chrysler Group since 2005 and the 52nd consecutive month the automaker’s U.S. sales have increased year over year.
Sales of the Cherokee totaled 14,827, helping Chrysler’s light-truck deliveries rise 27 percent, offsetting a 1 percent dip in car volume. Ram pickup sales increased 14 percent.
Overall, volume increased 41 percent at the Jeep brand, 18 percent at the Ram brand, 17 percent at the Chrysler brand, 3 percent at Dodge and 1 percent at Fiat.
Sales of the redesigned Chrysler 200 mid-sized sedan rose 32 percent compared with June deliveries, Chrysler said. Sales of the 200 were up slightly from a year earlier.
At Kia, sales jumped 7 percent to a July record of 52,309 vehicles on a 45 percent rise in deliveries of the Soul boxy subcompact. After posting lower sales last year, Kia has rebounded with sales up 7 percent to 349,722 through the first seven months of the year.
Hyundai's deliveries rose 2 percent to a July record of 67,011 on higher Sonata and Santa Fe volume.
“As the summer weather heated up across the country, so did the selling season,” Bob Pradzinski, vice president of national sales at Hyundai Motor America, said in a statement. “With 2015 models beginning to hit showrooms, incentive spend up across major brands and competitive financing available, it’s a buyers’ market that many shoppers took advantage of.”
Subaru posted its biggest monthly gain of the year -- 27 percent -- with volume of 45,714.
At Mazda, sales rose 17 percent to 29,238 vehicles, its best July since 1993, on a 16 percent rise in CX-5 compact crossover demand and a 47 percent jump in Mazda6 deliveries.
Another solid month
Industry sales were fueled by higher retail demand and incentives, widespread credit availability, low interest rates, attractive lease deals, and steady economic growth.
“The July 4th holiday got sales off to a great start, and the pace remained solid all month,” said Fred Diaz, senior vice president for U.S. sales, marketing and operations at Nissan.
Still, not all automakers are benefiting from the robust market.
The Volkswagen brand's slump continued with July deliveries sliding 15 percent on weaker demand for five core models -- the Golf, Jetta, Beetle, Passat and Tiguan. VW brand volume has now skidded 16 straight months year over year.
Audi's July sales advanced 12 percent to 14,616, marking the luxury unit’s 43rd consecutive monthly gain. Audi, citing lean inventories, said it also launched sales of certain 2015 models in July, about two months ahead of schedule.
Jaguar Land Rover reported U.S. sales of 5,830, an increase of 3 percent over July 2013.
Charting the deals
Overall, industry incentives averaged $2,731 in July. That marks an increase of 7 percent over July 2013 and a decline of less than 1 percent from June, TrueCar.com estimates.
Among the deals advertised online last month:
- Supplier pricing on GMC Sierras; zero-percent financing for 60 months on the GMC Denali and Buick Enclave and Lacrosse at Baytown GMC Buick in Baytown, Texas
- Zero-percent financing for 72 months on the 2014 Ram 1500 Big Horn Crew Cab 4x4, with no monthly payments for 90 days, and zero-percent financing for 72 months on a 2014 Chrysler Town & Country Limited, at Dewey Dodge Chrysler Jeep in Ankeny, Iowa
- Zero-percent financing for 60 months on all new vehicles at Culver City Honda in Culver City, Calif.
- A $1,000 reward card with the purchase of a 2014 turbocharged Volkswagen vehicle at Ken Garff Volkswagen in Orem, Utah
- Zero-percent financing for 72 months on most 2014 models at Greenway Ford in Orlando, Fla.
Larry Dominique, executive vice president at TrueCar.com, said automakers are being selective with discounts and low-rate financing.
Still, he said industry incentives in July were the highest since 2010 and he expects deals to remain elevated for the rest of the year.
“September will be a key litmus test for the industry’s appetite for even higher incentives,” Dominique said.
Because the Labor Day holiday falls earlier in the month, some automakers may be inclined to launch major promotions earlier than normal, he said.
Chrysler’s incentives averaged $3,458 per vehicle last month, the highest among major automakers and an increase of 13 percent over July 2013, TrueCar.com estimates. Ford and GM incentives averaged nearly $3,400 per vehicle last month, too, TrueCar estimated.
Rafael Sanchez, general manager of Chrysler Dodge Jeep Ram of Gadsden, in Gadsden, Ala., said rebates helped stoke the dealership’s volume last month, particularly on new cars.
“We’re tracking 90 car sales, which is good for a smaller dealership,” Sanchez said on Wednesday. Chrysler “is being aggressive ... and they’re staying aggressive with advertising and incentives.”
At Ames Ford Lincoln in Iowa, new-vehicle sales have risen fivefold in the last 18 months as buyers embrace low-cost financing on popular models such as the Fusion mid-sized sedan and F-150 pickup.
The “new car business is in very good shape right now,” said Rick Pattison, the dealership’s new-car manager. “New cars are really better than they have ever been.”
At Team One Toyota of Gadsden in Rainbow City, Ala., General Manager Scott Halpern described July sales as “fair” but ahead of Toyota’s objective.
“Traffic is down, it has been light. It may be because it’s the last month before school begins,” he said before today’s results were released, adding “inventories are thin in Toyota’s world.”
The store offered zero-percent financing on several models, but Halpern said the offer has “been played out.”
“Ten to 15 years ago, when interest rates were high, manufacturers jumped on the bandwagon to lower rates, and that attracted buyers,” he said Wednesday. “Low interest rates no longer attract buyers. Now they ask: ‘What else do you have?’”
Edmunds.com analyst Jessica Caldwell said consumers looked past recalls and rising gasoline prices and discovered affordable interest rates and other deals that made it easier to buy a new crossover or minivan in July.
Still, some analysts and automakers are worried the U.S. new-car market is creeping into a period of so-called unnatural demand.
Morgan Stanley analyst Adam Jonas warned again this week of the rise in extended-loan terms, artificially high average transaction prices, and inflated residual values.
“The U.S. auto cycle has clearly moved from a ‘need to buy,’ to an ‘I just want to buy’ type of consumer mindset,” Jonas said in a report. “Consumers buy cars like they buy houses -- lower payment, bigger car. There is a dark side to all this.”
He also estimates 130 percent of North America production capacity that was taken out in the downturn will come back online by 2016 -- posing another challenge for automakers.
“The industry is well entrenched in a multiyear arms race to bring to market new cars, new plants and new tech,” Jonas said. "We have little doubt that we're in bubble territory."
John Felice, Ford’s U.S. sales chief, also said the industry's sales growth is beginning to taper off as the U.S. market nears a peak. He noted industry incentives rose by $190 per vehicle in July. At the same time, average prices industrywide rose $800 per vehicle last month because car buyers shifted to more expensive SUVs.
“We’ve seen a very healthy industry this year, but the rate of growth has slowed,” Felice said today on a conference call. “On the car side of the business, incentive spending there is aggressive.”
Steven Szakaly, chief economist for the National Automobile Dealers Association, sees U.S. industry sales hitting 16.4 million this year and rising to about 16.8 million in 2015, where they will stabilize as pent-up demand eases.
“Interest rates are going to rise but the question is ‘how quickly’ they increase,” Szakaly said Thursday. “It has been a good, profitable run for the auto industry. But as you add capacity, too, profits are at risk.”
Ryan Beene, Reuters and Bloomberg contributed to this report.