Market rebounds in September, flat in Q3

The U.S. new-vehicle market closed the third quarter on a mixed note for automakers with the outlook for the final three months of the year looking increasingly cloudy as growing economic challenges and rising interest rates threaten what is supposed to be a more robust second-half rebound.

Motor Intelligence said the market rose 10.5 percent to 1.126 million last month, but remains down 13 percent at 10.281 million through September. It was one of the weakest Septembers in recent history, LMC Automotive said, with only Sept. 2021 and Sept. 2011 generating lower volume.

Hurricane Ian, which suppressed sales in the Southeast U.S., was also a factor in what LMC described as a "relatively sedate close to the month." 

And September became the fifth straight month in which U.S. retail sales tallied under 1 million, LMC said.

The seasonally adjusted sales pace came in at 13.7 million last month, Motor Intelligence said. That is slightly above the range of estimates from analysts -- 13.3 million to 13.6 million -- and up sharply from 12.38 million in September 2021, the lowest pace of sales since the early months of the COVID-19 pandemic. Third-quarter sales were flat at 3.4 million.

U.S. sales at Toyota Motor Corp., Hyundai, Kia and Subaru rose in September as the auto industry's inventory woes continue to ease. But sales fell 8.9 percent at Ford Motor Co., even as inventories grew, behind an 18 percent drop in truck volume and flat utility sales.

Third-quarter volume surged at General Motors but slid at Stellantis and Nissan Motor Co.

GM's third-quarter sales, helped by higher inventory, jumped 25 percent, with volume rising 30 percent at Chevrolet, 24 percent at GMC and 50 percent at Cadillac. Only Buick posted lower sales during the period, with volume down 27 percent. In addition to strong retail demand for SUVs, crossovers and pickup trucks, GM said fleet deliveries rose 66 percent in the latest quarter.

GM closed the third quarter with 359,292 vehicles in dealer stockpiles, including vehicles in transit, an increase of 111,453 from the second quarter, and nearly three times the inventory recorded at the end of 2021's third quarter.

Toyota Motor posted its first increase in monthly sales since July 2021, with volume last month rising 17 percent, with a 21 percent gain at the Toyota division eclipsing a 4.3 percent decline at Lexus. While the Toyota brand snapped a 13-month losing streak, Lexus sales have now dropped 8 straight months year over year.

Still, Toyota's third-quarter U.S. sales slipped 7.1 percent to 526,017, making GM the top seller in the period and year-to-date by healthy margins.

Toyota said it ended September with a 20-day supply of cars and light trucks in the U.S., or 140,810 units, with 117,888 at ports or in transit and 22,922 in dealer stock.

At Ford, September volume dropped 8.7 percent at the Ford division and 13 percent at Lincoln, ending three straight monthly gains at the two brands. While sales of Ford's newest models, the Maverick, Bronco and Mustang Mach-E, racked up big gains, Ford's other big sellers — F-Series, Ranger, Explorer, Bronco Sport and Edge — declined by 12 percent or more.

The automaker said consumer demand remains strong with retail orders for 2023 models rising 244 percent over 2022 models, with 197,000 retail orders on its books. More than 50 percent of Ford's retail sales came from previously placed orders for the sixth consecutive month in September.

And the automaker's gross inventory continues to rebound, rising to 315,000 at the end of September from 259,000 at the close of August and 236,000 at the end of September 2021.

Stellantis, citing "challenging industry supply constraints," reported a 6 percent drop in third-quarter volume, its fifth straight decline. The automaker's biggest brand, Jeep, posted an 18 percent decline during the period largely behind a 53 percent slump in deliveries of the Grand Cherokee, its biggest seller. Ram volume dipped 4 percent. Volume rose 39 percent at Chrysler and 22 percent at Dodge, but dropped 48 percent at Fiat and 24 percent at Alfa Romeo. 

Honda Motor Co.'s woes are continuing, with September volume skidding 17 percent behind a drop of 18 percent at the Honda division and 13 percent at Acura.  Deliveries have now declined 14 straight months at Honda and 13 consecutive months at Acura.

“While the auto industry seems to be hit by one challenge after another with transportation issues and parts shortages, the efforts of our dealers helped achieve strong turn rates that maximize the available inventory for our customers,” Mamadou Diallo, vice president of auto sales for American Honda Motor Co., said Monday. “The pipeline is getting stronger with the expectation that increased production in the fourth quarter will support important upcoming all-new model introductions, such as the CR-V, CR-V Hybrid and Pilot.”

At Nissan Motor, third-quarter sales dropped 23 percent behind a 24 percent decline at the Nissan division. Infiniti snapped a 4-quarter slump with a 5.4 percent gain in the latest three-month period.

Hyundai volume rose 11 percent to 59,465 last month on what it said was record retail volume. The company has prioritized retail deliveries to maximize profits and leverage tight new car and light-truck stockpiles, forgoing fleet business nine consecutive months now.

Hyundai said U.S. inventory stood at 24,919 units late last month, up from 19,209 as August closed but down slightly from 26,717 at the end of Sept. 2021.

Randy Parker, CEO of Hyundai Motor America, said the company was generating month-over-month gains in part to a strong product lineup — utility vehicles represented 68 percent of September retail sales, a 1.4 percentgage point increase — "with plenty of cars in the pipeline for the remainder of the year.”

Volume last month rose 6.4 percent to 56,270 at Kia, setting a September record for the automaker. It was the company's second consecutive monthly gain year over year. The automaker continues to benefit from an expanded crossover linup and new electric vehicles.

“Building upon record September and third-quarter sales, we’re optimistic that Kia will see a strong fourth quarter as well,” Eric Watson, vice president of sales operations at Kia America, said in a statement.

Volkswagen Group's VW brand said third-quarter U.S. sales rose 12 percent to 88,820, ending a streak of four consecutive quarterly declines, behind a 24 percent gain in deliveries of utility vehicles.

Subaru posted its second consecutive monthly gain with Sept. sales rising 8.6 percent, with the Crosstrek setting a monthly record of 16,092 deliveries, up 36 percent.

U.S. sales fell for the sixth straight month at Mazda, with Sept. volume slipping 1.1 percent to 23,700.

Sales skidded for the 13th straight month at Volvo with a 29 percent decline in September.

Genesis reported September sales of 4,907, a gain of 0.8 percent over 4,867 deliveries a year earlier. Hyundai Group's upstart luxury brand has now posted year-over-year sales growth 22 straight months, with year-to-date deliveries up 19 percent. But after rising by double-digits in the first six months of the year, Genesis' sales growth has slowed considerably in recent months, in another sign the market is losing some momentum.

Among other luxury brands, third-quarter sales rose 31 percent at Mercedes-Benz, 3.2 percent at BMW and 8.5 percent at Porsche.

Monthly sales have been stuck at around 1.1 million since August 2021 as automakers grapple with supply chain problems, notably a shortage of microchips.

The second-half rebound that automakers and analysts predicted early in the year is now threatened by major economic headwinds.

Consumer sentiment has turned sour again amid persistent inflation, rising interest rates and borrowing costs, and depressed equity markets. Gasoline prices, after weeks of steady decline, are on the rise again. And the housing market, which also helps drive new-vehicle sales, notably fleet volume, has cooled considerably.

“There’s a lot of negative consumer sentiment in the marketplace, we’re obviously concerned about that,” said Parker. “We’ve noticed that inventory levels from a lot of brands have started to pick up.”

Analysts have been forced to cut their outlook for 2022 U.S. light-vehicle sales, with some now below 14 million. LMC has trimmed its 2022 sales outlook by another 75,000 units to 13.7 million, a decline of 8 percent from 2021, and cut its 2023 forecast by 100,000 units to 15.3 million units.

"Risk continues to be elevated, centered on affordability concerns and low levels of vehicle inventory," LMC said.

September was the 16th consecutive month that retail inventory closed below 1 million vehicles, LMC Automotive and J.D. Power said. Cox Automotive says inventory continues to improve, though slowly — rising 41 percent, or by 350,000 vehicles — last month over September 2021. Kia, Toyota, Subaru, Honda, Lexus, Hyundai, Acura, BMW, Porsche, Land Rover, Mini and Mazda had the leanest supplies last month, Cox Automotive says, while Volvo, Ram, Dodge, Jeep, Lincoln, Jaguar, Audi, Buick, Chrysler and Cadillac had the highest stockpiles.

With inventories lean and retail demand still strong, discounts remain low.

The average incentive spending per new-vehicle last month was on track to fall to $936 from $1,792 in September 2021, LMC Automotive and J.D. Power said, with spending as a percentage of the average sticker price on pace to drop to 2 percent, down 2 percentage points from September 2021. September also marked the fifth consecutive month new-vehicle incentives averaged under $1,000. TrueCar estimates average discounts dropped 54 percent to $1,090 last month vs. $2,347 in September 2021.

The average new-vehicle retail transaction price in September was expected to reach $45,622, a 6.3 percent increase from September 2021, J.D. Power and LMC said. The previous high for any month — $46,173 — was set in July.

• There were 25 selling days last month, the same as in September 2021.
• After breaching the $700 level for the first time ever in July, the average monthly finance payment in September was on pace to be $711, up $56 from September 2021, J.D. Power and LMC said. That translates to an 8.5 percent increase in monthly payments from a year earlier, which is above the 6.3 percent increase in transaction prices.
• The average interest rate for new-vehicle loans was expected to increase by 1.69 percentage points from a year earlier to 5.71 percent last month, LMC and J.D. Power said.
• Fleet deliveries were expected to total 161,300 last month, up 75 percent from September 2021 on a selling-day adjusted basis, and fleet volume was expected to account for 14 percent of total light-vehicle sales, up from 9 percent a year earlier, J.D. Power and LMC said.

"With increasing interest rates, affordability is being tested. We're seeing consumers faced with the reality that to afford the same vehicle at the same monthly payment as last year, they are forced to increase their down payment, which is creating new affordability challenges. We are paying close attention to how the industry will react to these concerns. Perhaps there will be more incentives, longer finance terms, or a combination of these."

— Zack Krelle, TrueCar analyst