June sales advance 5.2%; SAAR soars

U.S. light-vehicle deliveries, boosted by healthy incentives, America's surging appetite for light trucks and an extra weekend of sales, rose 5.2 percent in June as the auto industry closed out the first half of 2018 on a high.

The seasonally adjusted sales rate for June came in at 17.47 million, up sharply from June 2017’s sale pace of 16.72 million and May’s 16.91 million rate.

“We’re in a good, old-fashioned bull market right now,” Charlie Chesbrough, senior economist for Cox Automotive, told Bloomberg News. “There’s been quite a bit of concern regarding trade and tariffs, but car buyers don’t seem to be worried yet.”

The biggest automakers in the U.S. all posted increases, wrapping up the first half of 2018 on a positive note amid analysts’ forecasts of a rougher ride later this year.

It was the fourth monthly and second-biggest sales advance of the year. Through June, sales have risen 1.9 percent over 2017’s level. Still, most analysts had been projecting the industry will end the year below the 17 million mark for the first time since 2014.

FCA US chalked up an 8 percent gain, its fourth straight monthly advance. General Motors, fueled by incentives averaging more than $5,200 per vehicle, was up an estimated 5.7 percent, ahead of the paces set by American Honda and Toyota Motor Corp. Ford Motor Co. and Nissan Motor Co. eked out small gains.

“The U.S. market is virtually saturated,” said Jeremy Acevedo, manager of industry analysis at Edmunds, before today’s results were released. “Add to that record-high vehicle prices, rising interest rates and historically high numbers of people who owe more than their cars are worth, and the stage is set for a market contraction.”

GM, however, suggests there’s plenty of momentum left.

"Tax reform raised take-home pay, consumer confidence is high and household balance sheets are healthy," said the automaker’s chief economist, Elaine Buckberg. "All of this plus a strong job market makes consumers more willing to commit to major purchases like vehicles."

Company by company

Ford Motor’s U.S. sales rose 1 percent in June behind higher pickup, SUV and crossover demand. Deliveries edged up 1 percent at the Ford brand and 2.8 percent at Lincoln. The company’s retail sales increased 2.9 percent to 156,788 last month while fleet volume dipped 2.3 percent to 73,847.

At Toyota, June volume jumped 3.6 percent. A 13 percent gain in light-truck deliveries offset a 9.2 percent dip in car demand. Sales rose 4.4 percent at the Toyota division but fell 6.2 percent at Lexus.

FCA US, helped by stronger results at Jeep and Ram, posted an 8 percent increase. Volume rose 19 percent at Jeep, 6 percent at Ram and 9 percent at Dodge, while deliveries skidded 32 percent at Chrysler and 36 percent at Fiat. FCA said U.S. retail sales totaled 155,208 last month -- its best June since 2004.

At Nissan Motor Co., June volume rose 1.2 percent, with sales up 2.5 percent at the Nissan brand but down 13 percent at Infiniti. Truck deliveries rose 9.7 percent last month while car sales dropped 7.5 percent.

Honda Motor Co.'s light-truck sales rose 12 percent to a June record of 78,483, offsetting weaker car volume and helping the company achieve a 4.8 percent overall gain. June deliveries increased 5 percent at the Honda division and 3.5 percent at Acura.

Among other automakers, June deliveries rose 18 percent at Hyundai, 15 percent at Subaru, 0.8 percent at Kia, 5.7 percent at Volkswagen, 20 percent at Mazda and 46 percent at Mitsubishi.

Among other luxury brands, June volume rose 1.5 percent at BMW, 8.3 percent at Porsche and 21 percent at Land Rover, but slipped 20 percent at Jaguar and 51 percent at Genesis. 

Volume continues to be driven by a strong economy, job growth and healthy light-truck demand -- notably crossovers. Low but rising finance rates are also supporting industry sales, automakers and analysts say. Sales were also driven by an extra weekend and early July 4 holiday promotions.

Trucks rule

Even amid rising U.S. gasoline prices, the steady consumer shift to crossovers, SUVs and pickups continued last month and is helping to propel average new transaction prices higher.

ALG estimates the average transaction price for a new light vehicle was $33,148 in June, up 0.7 percent from a year earlier.

Kelley Blue Book says June was a particularly strong month for pickups, as average prices for full-size models rose 5 percent to just over $49,000, behind new models and a richer trim mix. Pricing for midsize pickups, a segment without new products, climbed 3 percent in June, Kelley Blue Book says.

U.S. new-vehicle sales, after seven straight annual gains capped by a record 2016, dropped 1.8 percent to 17.25 million units last year.

Spiffs

The average new-vehicle incentive was tracking at $3,765 in the first three weeks of June, J.D. Power says. ALG estimates average new-vehicle incentives rose 4.6 percent from June 2017 to $3,779 last month, with the Detroit 3 among the biggest average spenders on deals. ALG pegged GM's average June outlay at $5,256, up 18 percent from a year earlier.

 Odds & Ends

• There were 27 selling days last month vs. 26 in June 2017.
• The annual percentage rate on newly financed light vehicles averaged 5.82 percent in June, compared to 4.96 percent in June 2017 and 4.10 percent in June 2013, Edmunds says.
• Zero percent financing loans reached their lowest level in nine years in June, constituting just 5.6 percent of total U.S. finance deals, compared to 9.47 percent in June 2017 and 10.55 percent in June 2013, Edmunds said.
• Fleet sales are expected to account for 20 percent of U.S. light-vehicle deliveries in June, down slightly from June 2017, J.D. Power says.
• The ratio of incentive spending to average transaction price is expected to be 11.4 percent in June, up from 11 percent a year earlier, ALG says.
• Days to turn, the average number of days a new vehicle sits on a dealership lot before being sold to a retail customer, was 70 through June 17, flat with the same period in June 2017, J.D. Power says.
• Light trucks accounted for 67 percent of U.S. light-vehicle deliveries in the first three weeks of the month, the highest level ever recorded in June, and the 24th straight month above 60 percent, J.D. Power says.