Pricing, interest rates temper sales rebound

Continued high interest rates scaring off some shoppers coupled with weakness in the fleet market led to mixed July results and a more modest rebound than expected following June's cyberattacks on a leading dealer management system.

U.S. light-vehicle sales volume in July was estimated at 1.3 million, according to GlobalData, down 0.4 percent from a year ago. Cox Automotive, however, estimated volume near 1.27 million, below its previous forecast of 1.29 million.

The estimated seasonally adjusted annualized rate of sales rose to 16.1 million units, up from 15.3 million in June and slightly ahead of last July's pace, according to GlobalData.

Of the seven automakers continuing to report sales monthly, Mazda, Subaru, Hyundai and American Honda posted gains. Toyota Motor North America sales dropped 5.1 percent, while Ford Motor Co.'s slipped 0.3 percent, Kia sales slid 10 percent and Volvo sales fell 11 percent. Other automakers that report U.S. sales do so on a quarterly basis.

"Expectations coming into the month of July were high. ... On this occasion, it seems that July's performance was disappointing, suggesting that the market could be losing a little momentum as we head into the second half of the year," David Oakley, head of automotive forecasting for the Americas at GlobalData, said in a statement. "Holiday sales events around Independence Day also appear to have been relatively ineffective this year. Elevated interest rates and stubbornly high pricing are keeping some potential buyers away, while some OEMs are being hampered by recalls preventing the sale of certain models."

Among the top performers, American Honda said deliveries rose 8 percent to 120,737 vehicles on the strength of light trucks as well as hybrid variants of the CR-V and Civic, which went on sale in July. Honda brand sales rose 9.9 percent while Acura slipped 7.3 percent.

Mazda's deliveries rose for the third consecutive month, up 30 percent to 39,866. The company said it was Mazda's best July on record.

Subaru's sales remained hot, rising 2.6 percent, driven in part by a 36 percent gain for the Crosstrek, which posted its best July ever, according to the company. Subaru has not had a monthly sales decline since July 2022, according to the Automotive News Research & Data Center.

Hyundai sales rose 4 percent to 69,202, led by a 50 percent rise for the Palisade crossover and a 79 percent jump for the Sonata sedan.

While vehicle prices remain high historically, average transaction prices were on pace to fall 2.6 percent, or $1,166, to $44,271 from July 2023, J.D. Power and GlobalData said, as discounting grows. Just 14.5 percent of new vehicles were sold above sticker price last month, down from 32.4 percent in July 2023, J.D. Power and GlobalData estimated.

Sales to commercial businesses, government agencies and daily rental companies were particularly weak in July, Oakley said, as dealers prioritized fulfilling delayed retail orders following June's cyberattacks that hampered many dealership operations for almost two weeks.

Fleet sales fell roughly 33 percent from the same period a year ago to about 152,000, or 11.7 percent of total sales, according to GlobalData.

New-car and light-truck inventories stood at 2.9 million in mid-July, Cox Automotive said, up 49 percent, or 966,000, from July 2023. Toyota Motor, Honda and Subaru continue to have the lowest stockpiles while Stellantis and Nissan Motor Co. have higher inventories.

The growth in inventory is expected to slow in the second half of the year as some companies adjust output amid swelling stockpiles.

The average incentive per new vehicle increased 52 percent from July 2023 to $2,892 last month, J.D. Power and GlobalData said. Incentive spending, as a percentage of the sticker price, was tracking at 5.9 percent last month, an increase of 1.9 percentage points from a year earlier.

"Some automakers are struggling to balance sales, production, inventory and incentive targets as the market returns to more normal dynamics than what occurred from 2020-23," said Joe Langley, associate director at S&P Global Mobility. "Our North American light vehicle production outlook for the remainder of this year has been scaled back as automakers attempt to manage these factors."

Overall growth is expected to slow in the second half after sales rose 2.2 percent in the first six months of 2024. Analysts say high interest rates and borrowing costs as well as elevated prices are stifling demand for new cars and light trucks. The prospect of interest rate cuts later in the year may help spur dealmaking. The Federal Reserve on July 31 left interest rates unchanged.

"While the Federal Reserve is indicating upcoming rate cuts and the overall economy is heading towards a soft landing, the concept of a rolling recession and vulnerabilities in certain sectors could materialize," Jeff Schuster, vice president of automotive research and analysis at GlobalData, said in a statement. "Lower transaction prices and availability of affordable vehicles are crucial in reigniting growth in light vehicle sales. The forecast remains optimistic, although it has slightly tempered over the next 18 months."

David Phillips, Carly Schaffner and Mark Hollmer contributed to this report.