U.S. sales skid hits 5 months; SAAR rebounds to 17.4M

U.S. light-vehicle deliveries slipped 0.3 percent in May, but the robust pace of sales -- 17.4 million -- offered a sign of hope as the industry barely missed posting its first monthly gain of the year.

The seasonally adjusted, annualized rate of sales in May came in at 17.4 million, well above the 16.9 million forecast. That is up from 17.26 million in May 2018 and April’s 16.41 million pace. The SAAR has slipped below 17 million three months this year, an early sign that the U.S. market continues to cool after four straight years of sales above 17 million units.

But May, among the top months for U.S. auto sales in terms of volume, is also often a harbinger of how the rest of the year will play out. In May 2018, the industry chalked up a 4.7 percent gain before finishing the year in the plus column.

May was the fifth straight monthly decline in year over year volume and comes even as the latest U.S. economic expansion hits the 10-year mark this month and nears the longest on record -- eclipsing the decadelong expansion of the 1990s -- in July.

"There's no denying many of the economic indicators we follow support strong sales," said Cox Automotive analyst Charlie Chesbrough, calling the May results a "complete reversal from a slow April."

While retail sales continue to slip, higher fleet shipments appeared to boost some automakers last month, analysts said. 

FCA US, Toyota, Nissan, Hyundai and Subaru posted higher U.S. sales in May while General Motors, Ford and other Japanese brands fell.

U.S. new-vehicle deliveries had fallen 3 percent through April and are now off 2.4 percent through May, with softer retail volume offset by higher fleet shipments. General Motors said industrywide retail sales dropped four percent through May while fleet volume rose seven percent in the first five months.

“Shoppers who made it to the dealership on Memorial Day weekend were lucky enough to snag some of the best deals we’ve seen all year,” Jeremy Acevedo, Edmunds’ manager of industry analysis, said in a statement.

Results by automaker

Fiat Chrysler rode a huge gain for Ram and strong fleet sales to its first increase since January. Toyota Motor Corp. ended a six-month skid with a 3.2 percent advance, while Subaru capped its 90th straight monthly rise with an exclamation point: up 6.4 percent.

General Motors no longer releases monthly U.S. sales but the Automotive News Data center estimates the company's deliveries dropped 1.2 percent last month. 

Ford Motor Co. sales dropped for the fourth straight month -- deliveries fell 4.1 percent with volume down 4 percent at the Ford division and 5.8 percent at Lincoln, according to the Automotive News Data Center.  Ford Motor's car sales skidded 24 percent last month while light-truck demand rose 1.5 percent.

At Toyota, deliveries rose 4.1 percent at the namesake division but dropped 3.4 percent at Lexus. Overall car sales -- a weak spot all year for the company and the industry --  edged up 0.4 percent, on a 21 percent increase in Camry demand. Light truck sales climbed 4.9 percent.

Fiat Chrysler advanced 2.1 percent on the strength of pickups. A 29 percent rise in Ram volume offset declines of 7.2 percent at Jeep, 26 percent at Chrysler, 29 percent at Fiat and 34 percent at Alfa Romeo. Deliveries rose 2.5 percent at Dodge.

The company said fleet shipments represented 31 percent of volume -- or about 67,800 cars and light trucks -- last month. May marked the end of a three-month sales skid at FCA after 11 consecutive gains dating back to March 2018.

Sales edged up 0.1 percent at Nissan Motor, with volume up 1.1 percent at the Nissan division but down 10 percent at Infiniti.

Sales slipped 4.9 percent at Honda Motor Co. American Honda said volume fell 5.9 percent at the Honda division but rose 5.7 percent at Acura, with car deliveries down 7 percent or more at each brand.

Hyundai brand sales rose 1.8 percent as the company continues to benefit from new and redesigned crossovers. Kia volume rose 1 percent.

At Subaru, volume rose to 63,972 behind strong demand for crossovers, notably the all-new Ascent and Outback. It was also the first May that Subaru's U.S. sales topped 60,000. VW brand sales rose 14 percent.

Among other automakers, volume dropped 16 percent at Mazda, 33 percent at Mini and 3.6 percent at Smart. At Mitsubishi, sales skidded 21 percent to 9,750, continuing a topsy-turvy year. The franchise had gone from a 37 percent increase in March to a 13 percent skid in April.

Other luxury brands were mixed last month, with volume rising 0.1 percent at Porsche, 115 percent at Genesis, 1.7 percent at BMW, 4.5 percent at Volvo and 3.3 percent at Land Rover but falling 0.4 percent at Mercedes-Benz, 2.2 percent at Audi and 15 percent at Jaguar

Mixed signals

Even against the backdrop of generous discounts, a strong economy, increasing wages and healthy job growth, rising new-vehicle prices, higher lease payments and growing supplies of late-model used vehicles are undermining retail demand, analysts say.

The University of Michigan’s monthly survey of U.S. consumer sentiment showed buying conditions for large household durable goods, notably cars, fell to its lowest level in four years in May. There was a big drop in sentiment toward big-ticket purchases in the last two weeks of the month, the survey showed, when the prospect of U.S. tariffs on imports dominated business- news cycles.

“Pressures on the auto industry continue to mount,” said Jeff Schuster, head of forecasting at LMC Automotive. “Chief among these is vehicle affordability … which outweighs the strong economy and record-high consumer sentiment that otherwise should portend continued growth in U.S. auto sales. Despite these positives, some consumers have decided to either forego a new-vehicle purchase by remaining in their existing vehicle or else have shifted to the used-vehicle market.”

But in a separate monthly report on consumer confidence by The Conference Board, buying plans for cars, homes and major appliances all increased in May. The share of respondents planning a car purchase within six months climbed to an all-time high going back to the 1960s.

Deals and discounts

The average incentive on a new-vehicle rose to $3,722 in the early weeks of May from $3,697 a year earlier, J.D. Power said. ALG said incentives dropped 10 percent to $3,359 last month, with Nissan and the Detroit 3 among the biggest spenders. Nissan and Honda hiked discounts in May, while Ford, GM and Toyota pared spending, JPMorgan analysts said.

Odds, ends

• There were 26 selling days last month, the same as in May 2018.
• Interest rates for new vehicles averaged 6.1% in May, the lowest this year, according to Edmunds, as automakers offered more 0% financing deals as part of Memorial Day promotions.
• Pickups, SUVs, crossovers and other light trucks accounted for 70.8 percent of new-vehicle retail sales through May 19, the highest level ever for the month, J.D. Power said.
• Days to turn, the average number of days a new vehicle sat on a dealer lot before being sold to a retail customer, was 74 days through May 12, up 5 days from last year, said J.D. Power.
• New-vehicle inventory has exceeded 4 million units every month in 2019, near peak levels dating back to 2000, according to the Automotive News Data Center.
• Fleet sales are expected to total 332,000 units in May, up 1.9 percent from May 2018, J.D. Power said. Fleet volume is expected to account for 21 percent of total light-vehicle sales, up 0.8 percentage points from last year.

Quotable

“Despite the increase in discounts, the industry continues to exhibit reasonable incentive discipline. Spending as a percentage of MSRP remains below the 10 percent threshold at 9.1 percent.” -- Thomas King, head of data and analytics at J.D. Power

“It’s going to be an up-and-down year. Automakers are still figuring out how to balance supply with declining demand, but incentive budgets aren’t big enough for dealers to offer deep discounts on a consistent basis. And when those bargains go away, so do the shoppers.” -- Jeremy Acevedo, manager of industry analysis at Edmunds

Bloomberg and Reuters contributed to this report.