Amid signs that the U.S. new-vehicle market has stopped growing, July marked the industry’s strongest selling rate of the year.
Through July, sales were 1.1 percent ahead of last year’s record pace. But several forecasters have reduced their outlook for the remainder of 2016, and some automakers are starting to fight the stagnating market with more aggressive incentives.
“I think it’s an indication, in a plateauing market, that the major players are going to protect share,” Mark LaNeve, Ford Motor Co.’s vice president for U.S. marketing, sales and service, said last week. “It’s a more competitive market than we’ve experienced in the last five or six years.”
The Detroit 3 spent $655 more per vehicle on incentives last month than in July 2015, an 18 percent increase, according to Autodata. BMW’s incentive spending jumped $1,884, or 42 percent, and Volvo’s climbed $839, or 25 percent. The industry average rose $337 year-over-year, or 11 percent.
Industry sales rose just 0.5 percent in July. But that was enough to push the seasonally adjusted, annualized selling rate to 17.86 million, the highest since November.
General Motors offered discounts of up to 20 percent on many high- volume nameplates, including the Chevrolet Silverado pickup, in early July. The deals spurred a big influx of traffic at Edwards Chevrolet, which has two showrooms in Birmingham, Ala., pumping up sales more than 30 percent in the first eight days of the month.
“It was a huge spurt at the beginning, and then it was steady the rest of the month,” said Lee Edwards, president of Edwards Chevrolet, which marked its 100th anniversary last week. “In terms of pure pricing, it was probably some of the best deals that they’ve had in our 100 years.”
Edwards said he was searching for a 1- or 2-year-old Chevy Tahoe for his daughter to drive at college, but the deals were so good that he was able to get her a new one for less. He said the market does appear to have reached its peak, but he’s not concerned.
“If we’re not there, we’re getting close,” he said. “After 2009, I will not complain about a market even off 10 percent where we are. A market like this that’s sustained is still a great market. I think we’ve still got at least two or three good years ahead.”
In seven months this year, automakers have sold nearly 10.2 million vehicles, nearly matching the industry’s full-year 2009 tally of 10.4 million. July was the fifth consecutive month in which sales topped 1.5 million units, marking only the third such streak in history, according to the Automotive News Data Center. (The others were in 2000 and 2005.) August, barring a decline of at least 4.9 percent, would be an unprecedented sixth month in a row at that volume.
“We seem to be having this plateau that we’re probably going to be stuck at for a while as opposed to falling off, which isn’t a bad thing when that plateau is above 17 million,” said Karl Brauer, senior director of insights with Kelley Blue Book.
“It’s not that they’re falling, they’re just not growing anymore. There’s still a fair amount of pent-up demand. There are still a lot of people out there who want a new car.”
He added: “In any year where more than 17 million new cars are sold, nobody in the industry is allowed to complain.”
Beyond the record — or near-record — volume, automakers and dealers are enjoying still-rising transaction prices. The average price jumped 3 percent from a year ago to $34,437, according to KBB data. While several luxury brands fell short of that gain, all four GM brands saw prices rise more than average, as did the Ford, Chrysler, Dodge and Toyota brands.
Even as consumers gravitate toward larger vehicles — light trucks accounted for 61 percent of July sales, up from 57 percent a year ago — incentives are rising faster for light trucks than for cars this year. Through July, incentives on full-size pickups from Chevy, Ford and Ram were more than $1,000 higher than in the first seven months of 2015. Yet sales of the Silverado and Ford F-series declined in July, and the Ram posted a gain of just 1.7 percent.
Still, full-size pickups were the second largest segment in July, behind only compact crossovers, whose sales rose 12 percent. Midsize cars, the U.S. industry’s largest segment in 2015, ranked fourth in July, after being eclipsed by compact cars.