Sales slip on lower Detroit 3 volume; SAAR rebounds from August

Ford, General Motors, Fiat Chrysler and Honda posted U.S. sales declines in September while Toyota and Nissan advanced as industry volume slipped for the second straight month, even as discounts rose.

Overall, light-vehicle deliveries fell 0.7 percent to 1.434 million last month but remain ahead 0.3 percent for the year.

The seasonally adjusted, annualized pace of sales -- 17.74 million -- came in stronger than the forecast for 17.5 million. The SAAR also rose sharply from 16.97 million in August but fell from Sept. 2015’s torrid 18.04 million rate.

The relative strength of September’s sales tally, amid higher incentives, did little to make it clearer if the U.S. auto industry will eke out another annual gain or fall short of 2015’s record of 17.5 million deliveries.

“The new car market is no longer growing, which means automakers now have to measure success in terms of market share, transaction prices, incentive levels and profitability," said Karl Brauer, senior analyst for Kelley Blue Book. "In these areas most automakers are still doing quite well, as a market plateau above 17 million annual units leaves plenty of room for success. However, some manufacturers are already leaning heavily on incentives and or fleet sales, which don't contribute to long-term corporate health.”

Nissan Motor Co. rebounded from an August drop with a 4.9 percent gain. Ford Motor Co. echoed its August setback with an 8.1 percent fall. Toyota Motor Corp. ended a four-month skid, while General Motors volume was down for a sixth straight month. Fiat Chrysler’s 0.9 percent decrease included a rare slip at Jeep.

J.D. Power and LMC Automotive said volume over the Labor Day weekend -- typically one of the best sales periods of the year -- fell 1 percent to just under 200,000 despite more-generous deals, casting more doubt on the strength of the retail market.

Company highlights

Ford Motor's retail sales slipped 4 percent and fleet deliveries dropped 21 percent last month.

At GM, deliveries slipped 0.6 percent in September, with volume up 14 percent at Buick and 3.1 percent at Cadillac, but off 0.3 percent at Chevrolet and 8.7 percent at GMC. Honda Motor Co. volume dipped 0.1 percent, with record truck sales for the month offset by weaker car demand. GM's retail volume rose 0.3 percent.

Sales rose 1.5 percent to 197,260 at Toyota, with volume up 1.4 percent at the Toyota division and 2 percent at Lexus. Nissan's deliveries advanced 4.9 percent to 127,797 in September on higher discounts and demand for trucks, SUVs and crossovers.

Volume increased 4.3 percent at the Nissan Division and 12 percent at Infiniti. The company said overall sales of Nissan brand crossovers, trucks and SUVs rose 20 percent to 56,703, a September record.

TrueCar estimates Nissan’s average car and truck incentive rose 12 percent to $3,896 last month compared with September 2015. (See table at bottom of this story.)

September sales rose 4.1 percent at Hyundai but slipped slightly at Kia.

At the Volkswagen Group, the VW brand's skid continued for the 11th straight month, with sales off 7.8 percent in September. Audi deliveries rose 1.6 percent, extending the luxury brand's monthly year over year gains to 83 straight months.

Deliveries rose 3.5 percent at Subaru and 1.6 percent at Volvo, while sales slipped 2.8 percent at Mazda and 4.8 percent at Mitsubishi.

Subaru's U.S. sales for the nine-month period have increased 4.2 percent to 446,887 vehicles. “With September sales exceeding 50,000 vehicles for the third month in a row, Subaru is in a great position to achieve its eighth consecutive all-time sales record in 2016,” Subaru of America President Tom Doll said.

At the peak?

After a six-year run of U.S. sales gains, some analysts and automakers believe sales have peaked. Other executives and analysts -- citing low interest rates, easy credit terms, steady job growth and high consumer confidence -- say there is more room to run.

“Key economic fundamentals like a strong jobs market, rising personal incomes, low fuel prices and low interest rates continue to point toward strong industry performance,” said Mustafa Mohatarem, GM’s chief economist. “We think the industry is well positioned for a continued high level of customer demand into the foreseeable future.”

Barclays analyst Brian Johnson, in a research note last month, said “a seeming commitment by automakers to maintain pricing discipline implies weaker volumes ahead.”

Toyota's "fourth quarter outlook is strong thanks to our best light truck supply of the year," said Bill Fay, general manager of the Toyota division. “We’re still bullish that the next couple years will be -- maybe not at record levels -- but pretty darn close.”

Jeff Schuster of LMC Automotive, one of the first analysts to forecast a contraction in 2016, says the industry may still benefit from pent-up demand as a stronger labor market and rising consumer confidence prompt buyers to make big purchases.

Honda, which traditionally avoids fleet business, sees ongoing strength in the retail market.

“We’re continuing to see very healthy sales growth,” John Mendel, the company’s top U.S. sales executive, told reporters on a conference call last month. “Our fundamentals are very, very good: low incentives, strong organic demand for not only trucks but cars, and still no fleet business.”

Big discounts

Sales this year have been inflated somewhat by bigger discounts offered to customers.

Incentives reached a record of $3,923 per vehicle last month, according to J.D. Power. The previous record of $3,753 was set in December 2008, the month that the U.S. government first issued emergency funding to General Motors in preparation for its eventual bankruptcy filing.

TrueCar estimates industry incentives averaged $3,387 last month, or 7.8 percent higher than September 2015 and up slightly from August. The biggest spike in deals among mass-market automakers was at Ford, FCA, Subaru and Volkswagen Group.

Barclays said average transaction prices and discounts rose on large pickups last month, but average prices fell 3 percent and incentives rose 30 percent on crossovers. Prices dropped and incentives dropped on SUVs, as well, Barclays said.

Overall, light trucks continue to drive the market, while car demand remains weaker, analysts say.

“We’re going to end up with one of our better months,” said Jeff Bianchi, the general sales director at Town & Country Ford of Nashville in Tennessee.

Bianchi said the F-150 pickup, which always does well, was a strong seller again in September. He said Escape and Fusion sales were also strong for the month.

“I’m happy with September,” Bianchi said. “In September of an election year, if you can be profitable, you’re doing good.”

The store’s incentives on the F-150 included up to $2,000 bonus cash for first responders and $500 competitive lease cash for customers that lease a competitive brand. Another F-150 September offer included up to $5,000 in bonus cash toward a purchase.

Transaction prices 

Average transaction prices remain high, allowing automakers to generate hefty profits in North America. But ever-increasing incentives, as demand wanes, raise concerns about the industry’s ability to react to higher interest rates or other threats to demand.

“The industry is getting to a point that it’s a risk and potentially a problem,” said Schuster. With stocks at the end of August at a healthy 61 days of supply, he said he’s “certainly not panicking” about the elevated promotions.

Ford continues to warn that in addition to a planned decrease in the company’s fleet shipments, retail demand is no longer growing.

“The industry has plateaued,” CEO Mark Fields told Bloomberg Television last week. “We are seeing some weakness in the retail end of the marketplace that’s manifesting itself through more competitive pressures.”

Stephanie Hernandez McGavin, Diana T. Kurylko and Bloomberg contributed to this report.