Auto sales tumbled in July as weakness in the housing market sapped demand, increasing pressure on Detroit's embattled Big Three and hitting Japan's Toyota Motor Corp. with its first U.S. sales decline in almost three years.
One industry analyst said the U.S.-based Big Three accounted for less than 50 percent of total sales for the first time ever, down from a peak of about 77 percent in the mid-1980s.
General Motors posted a sales drop of nearly 19 percent, a downturn that underscored the risks for the No. 1 U.S. automaker a day after it surprised Wall Street by posting stronger-than-expected second quarter results.
Ford’s sales dropped almost 17 percent, reflecting slower showroom traffic and an 18-percent decline in sales for Ford’s market-leading F-Series pickup trucks.
GM estimated that industry-wide sales dropped about 10 percent in July. Both GM and Ford said the deepening slump put their more-optimistic full-year sales expectations at risk, a development that could prompt production cutbacks and more aggressive discounting.
Toyota, which had consistently bucked the downturn in U.S. sales, posted a 3.5 percent sales decline, its first such drop since August 2004.
Sales for smaller rival Honda Motor Co. fell 3 percent, despite stepped-up incentive spending.
On a year-to-date basis, Toyota overtook Ford in sales to claim the No. 2 position in the U.S. market, but the automaker’s North American sales chief said the economy was crimping demand across the board.
“The industry stumbled this month on continued housing weakness,” Toyota’s Jim Lentz said in a statement.
Nissan Motor Co. posted a 6 percent gain on stronger sales of its newer Versa subcompact and Altima sedan. But Nissan-branded truck sales dropped 10 percent.
“Some of the housing issues (and) fluctuating fuel prices are keeping consumers off balance,” Nissan Division chief Bill Bosley told Reuters.
Wall Street analysts and most major automakers, including GM and Toyota, track monthly sales results after adjusting for the number of sales days.
On that basis, July had one fewer day than a year earlier, meaning a difference of almost 4 percentage points between unadjusted and adjusted sales results reported by different news outlets.
Chrysler Group, a majority of which is being sold off by Germany's DaimlerChrysler AG, posted an 8 percent drop in July sales on an unadjusted basis.
All told, GM, Ford and Chrysler accounted for about 49.7 percent of U.S. auto sales for the month, said Jesse Toprak, senior analyst for the Edmunds.com automotive Web site. That may not mean much to the average consumer but could damage the psyche of Detroit auto executives, Toprak said.
“It’s probably a turning point for people who look at the record books. Domestics on their home turf are being beaten by the foreign automakers in terms of their market share,” he said.
Analysts had expected July sales to show a year-on-year decline, but the slump was more pronounced than many had anticipated and came at the start of the summer selling season, when manufacturers typically look to clear inventory. U.S. auto sales, one of the leading indicators of consumer spending, began slowing in the second-quarter and the additional effects of a weakening housing market and relatively high gasoline prices capped demand in July, executives said.
Overall vehicle sales, including heavier trucks, had run at an annualized rate of about 16.7 million vehicles in the first half of the year but appeared to have dropped to a rate near 15.7 million in July, GM’s chief sales analyst Paul Ballew said.
The weaker sales for the industry in July came despite stepped-up incentive spending.
On a combined basis, the average new car incentive, including cash rebates and concessional financing, cost manufacturers $2,524 in July, up 4 percent from a year earlier, according to industry tracking service Edmunds.com.
The Detroit-based manufacturers led the pack on incentives, with Chrysler at $4,820, followed by GM at $3,130 and Ford at $2,984 on average, Edmunds said.
But in a continuation of a recent trend, major Japanese manufacturers also discounted more aggressively in July.
Toyota increased its incentive spending almost 48 percent year-on-year to $1,492 per vehicle in July, while Honda’s spending jumped 28 percent to $1,146, according to Edmunds.
Auto sales incentives are widely tracked by analysts as an indication of the relative profitability of competing automakers and the pressure they face to move inventory.
The market for pickup trucks, which accounts for about 13 percent of overall U.S. auto sales, has become the most fiercely contested segment, as automakers sacrifice margins with expensive sales offers in order to protect market share.
In July, GM, Ford, Toyota and Chrysler were all offering interest-free financing and cash rebates to bolster truck sales, which are closely tied to construction spending and housing starts.