Ford, FCA US and Japan's biggest automakers reported lower February U.S. sales as severe winter weather, lingering effects of the temporary U.S. government shutdown and anxiety over federal tax refunds curtailed showroom traffic.
While car sales continue to slump, demand for popular light-trucks such as the Ford F series, Toyota RAV4, Nissan Rogue and Jeep Wrangler, keystones of the market's recent strength, also fell last month.
"With January’s government shutdown and record-breaking sub-zero temperatures in the rearview mirror, we expected a general upward lift in February," said Charlie Chesbrough, senior economist for Cox Automotive. "However ... the results today suggest a much bigger story: The sales pace has finally shifted into a lower gear."
At Ford Motor Co., deliveries fell 4.4 percent on lower car demand. Sales dropped 5.1 percent at the Ford division but rose 15 percent at Lincoln.
Fiat Chrysler, citing "bitter weather across key selling regions," snapped an 11-month streak of year-over-year U.S. sales gains with a 2.3 percent decline in February volume, even as incentives rose.
Ram, with deliveries up 24 percent, was the only FCA brand to post a gain last month. Volume dropped 4.2 percent at Jeep (the brand's second straight dip), 36 percent at Chrysler, 7.7 percent at Dodge, 50 percent at Fiat and 13 percent at Alfa Romeo.
FCA's average new-vehicle incentive rose 4.1 percent last month to $4,524 from February 2018, ALG estimates.
"The overall industry is starting off slower due in part to weather, the U.S. government shutdown, and concern over tax refunds,” Reid Bigland, head of U.S. sales for FCA said in a statement. “We still see a strong, stable economy and anticipate any lost winter sales will be made up in the spring."
Toyota Motor Corp.'s U.S. sales fell 5.2 percent in February on weaker car and light-truck demand. Deliveries fell 6.3 percent at the Toyota brand but rose 4.4 percent at Lexus, with combined car volume down 10 percent and light-truck demand down 1.8 percent at the two units.
Honda Motor Co.'s deliveries dipped 0.4 percent, with sales down 1.6 percent at the Honda division but rising 11 percent at Acura.
Nissan Motor Co. said sales slipped 12 percent to 114,352 units. Even its truck sales suffered, falling 13 percent during the month. Notably, Rogue crossover sales dropped 16 percent to 31,889.
Sales rose 2 percent at Hyundai and 6.7 percent at Kia but declined 3.6 percent at the VW brand.
Subaru, benefiting from strong demand for the new Ascent and redesigned Forester, said sales rose 3.9 percent in February, extending its streak of year over year increases to 87 months. Among other automakers, sales rose 6.1 percent at Mitsubishi but fell 7.3 percent at Mazda.
Among other luxury brands, volume rose 10 percent at Porsche, 5.6 percent at Volvo, 59 percent at Jaguar, 19 percent at Land Rover and 12 percent at Genesis, but dropped 17 percent at Infiniti and 12 percent at Audi.
Later reports
When other automakers report results today, U.S. light-vehicle sales are expected to have fallen in February, based on forecasts from several analysts – making it one of the slowest recent starts to a year. In January, volume fell 1 percent and the seasonally adjusted sales rate – 16.9 million – dropped below 17 million for first time since August.
Analysts polled by Bloomberg expect the February SAAR to fall to 16.7 million from 17.08 million in February 2018. Along with January, February is among the weakest months of the year for new-vehicle sales.
Deutsche Bank analyst Emmanuel Rosner expects retail sales to fall 2 to 3 percent in February while fleet deliveries could be flat. “GM appears to have had a soft sales month as it prioritized discipline on incentives while Ford and FCA likely took some share,” Rosner said in a report this week.
In addition to severe winter weather that curtailed showroom traffic, Presidents Day deals failed to provide a lift in sales, Edmunds analysts said. Retail sales continue to slip, analysts said, while some automakers are boosting deliveries to fleet customers.
U.S. sales topped 17 million units for an unprecedented fourth straight year in 2018 but most analysts see volume slipping below that threshold in 2019.
Higher interest rates, affordability and abundant late-model used vehicles will continue to undermine new-vehicle sales, analysts said, even as the U.S. labor market remains strong.
"The U.S. economy remains robust on many fronts, such as unemployment rate and consumer confidence, keeping vehicle sales at a healthy pace," said Oliver Strauss, chief economist for TrueCar's ALG unit.
Strauss said new-vehicle sales have been stymied by consumer anxiety over tax refunds, which initially tracked lower in 2019 and are a traditional key source of down payments for many buyers.
Company outlook
Among major automakers, only two are expected to post February gains: Honda, with a projected 0.7 percent increase, according to a survey of analysts by Bloomberg, and Hyundai-Kia, with an expected 2.15 percent gain, the average of Cox Automotive and Edmunds forecasts.
Bloomberg’s poll of analysts projected February sales would drop 5.6 percent at General Motors, 1.5 percent at Ford Motor Co., 0.3 percent at Fiat Chrysler Automobiles, 2.5 percent at Toyota Motor and 11 percent at the Nissan Group. GM and Ford no longer publicly release monthly sales results.
Incentives
The average incentive continued to fall in February for the eighth straight month and was tracking at $3,721 per unit, a drop of $161 from February 2018, J.D. Power said, based on the month’s first 14 selling days. The Detroit 3, with deals averaging more than $4,000 per unit, and Nissan continue to dangle the highest average incentives, ALG said. (See chart below.) Fiat Chrysler, Ford, Honda, Kia, Subaru, Toyota and Volkswagen Group were among full-line automakers that hiked incentives last month over February 2018, ALG said.
Odds, ends
- There were 24 selling days last month, the same as February 2018.
- ALG estimated the average transaction price for a new light vehicle was $34,565 last month, up 3 percent from February 2018, while incentives as a percentage of ATP stood at 10.6 percent, down from 11 percent year over year.
- The annual percentage rate on new financed vehicles averaged 6.26 percent last month, compared to 5.19 percent in February 2018 and 4.56 percent five years ago, Edmunds said.
- The average number of days a vehicle sat on a dealership lot before being sold was tracking at 73, up three days from February 2018, J.D. Power said.
- Fleet sales probably rose 3.4 percent to 341,200 in February, accounting for 26 percent of industry volume, up from 25 percent last year, Power said.
Quotable
“One risk to higher [incentive] spending in the coming months is the need to clear out old model-year inventory. The model-year transition is currently the slowest on record and could pose a risk for manufacturer profitability if it continues to lag behind prior years.”
-- Thomas King, head of data and analytics at J.D. Power, noting that 2018 model-year and older vehicles accounted for more than 20 percent of industry sales last month, up from 17.4 percent in February 2018. Incentive spending on old model-year vehicles was $4,927 per unit last month, up $141 from February 2018.
“Shopping conditions are pretty unfavorable for consumers across the board, and even those with good credit are having trouble finding compelling finance offers. As rising vehicle costs and interest rates continue to compromise affordability, more shoppers might find themselves priced out of the new vehicle market.”
-- Jeremy Acevedo, manager of industry analysis at Edmunds
Editor's note: An earlier version of this story misstated the change in Alfa Romeo's U.S. sales in February.
