U.S. sales fell sharply at General Motors and FCA US during the second quarter as the coronavirus brought much of the auto industry to a standstill.
GM said volume dropped 34 percent during the period, with retail deliveries down 24 percent, and overall demand off 34 percent at Chevrolet, 33 percent at GMC, 36 percent at Buick and 41 percent at Cadillac.
Facing shortages of key models as consumer demand slowly recovers, notably large pickups and SUVs, GM said its increasing factory output "will be devoted to restocking retail channels with capacity made available by lower rental volumes."
At the same time, GM warned "the path forward may not be linear" as COVID-19 infections continue to rise.
FCA US, citing the economic havoc caused by the outbreak, said second-quarter U.S. sales slumped 39 percent to 367,086, with every brand posting a decline of 21 percent or more. Volume fell 27 percent at Jeep and 35 percent at Ram during the period.
Jeff Kommor, head of U.S. sales for FCA, said retail sales have rebounded since April, with steady gasoline prices, access to low-interest finance rates and renewed economic activity prompting some consumers to shop and purchase a new car or truck.
FCA said it prioritized retail deliveries over fleet volume in the second quarter and indicated it has a "strong fleet order book" which will be fulfilled in the second half.
Toyota Motor Corp. posted a 27 percent decline in June volume, with sales falling 10 percent at Lexus and 29 percent at the Toyota division.
U.S. light-vehicle sales at Hyundai fell 22 percent in June, the brand’s second-smallest monthly drop since the coronavirus idled the auto industry and shuttered showrooms coast to coast starting in March. Second-quarter volume dropped 24 percent.
Hyundai said retail sales, up 6 percent to 48,935, rose for the second consecutive month in June, behind strong crossover volume, which represented 69 percent of retail deliveries. Hyundai was one of just two automakers to cut incentives last month, according to ALG/TrueCar. (See chart below.)
Fleet sales dropped 93 percent and represented 2 percent of June volume, the company said.
Most other automakers will report results for the month and second quarter later Wednesday. Ford Motor Co. plans to release U.S. sales figures for the second quarter on Thursday.
Light-vehicle sales are forecast to fall 24 to 30 percent in June, based on estimates from ALG/TrueCar, J.D. Power /LMC, Edmunds and Cox Automotive, with every automaker posting declines. Second-quarter deliveries, led by lower fleet demand, are also expected to drop sharply across the industry as a result of the COVID-19 outbreak that crimped showroom activity and light-vehicle output.
The overall market dropped 23 percent this year through May, with fleet shipments off 38 percent and retail volume down 19 percent, according to Cox Automotive.
Pent-up consumer demand, easing government restrictions on business and household activity, and record incentives all provided a tailwind for the industry in June, said Thomas King, president of the data and analytics division at J.D. Power.
“Remarkably, in markets like Detroit -- one of the most severely affected areas by COVID-19 -- retail sales are on pace to exceed 2019 levels,” King said.
Still, the next few months, when government stimulus programs run out and additional jobless benefits expire, and unemployment is expected to remain elevated, will provide another test of consumer resiliency.
And with new coronavirus cases increasing, notably in the west and south, and in some of the industry’s biggest markets -- Houston, Los Angeles and large swaths of Florida – households, dealers and automakers could face new restrictions depending on local and state efforts to contain the virus.
Ford, in the latest sign automakers are bracing for a spotty rebound, this week said customers who lease or purchase a new or used vehicle through Ford Credit -- and then lose their job within a year – can return the vehicle without paying any remaining balance up to $15,000.
With consumers returning to showrooms and assembly plants ramping up output, inventory is running tight, notably popular pickups, crossovers and SUVs such as the Ford Explorer and Ram pickup.
Some Honda dealers report they are running low on some popular cars – notably Civic LX, Civic hatchback and Accord LX models. The shortages are expected to undermine industry sales in July and August, when many dealers expect inventories to begin to rebound.
SAAR
The seasonally adjusted sales rate is expected to tally 12.6 million to 13 million, down from 17.22 million in June 2019, but up from May’s 12.2 million rate, Cox Automotive, Edmunds, J.D. Power and ALG/TrueCar estimate.
Barclays analyst Brian Johnson, citing new insurance policies and other data, estimates the June SAAR will come in at 13.1 million.
On Friday, Morgan Stanley analyst Adam Jonas raised the Wall Street’s firm’s June SAAR forecast to 13.5 million from 13 million, reflecting strong sales trends, but reduced his July SAAR forecast significantly to 12 million from 13.5 million, on expectations that dealer stockpiles “may test or even dip below 50 days’ supply” at the end of June.
Incentives
Incentives were on track to reach $4,411 in June, the highest ever for the month and an increase of $445 from June 2019, J.D. Power said. June incentives on cars are expected to rise $459 to $4,031, with deals on trucks and SUVs rising, on average, $407 to $4,524.
ALG data show the Detroit 3 continue to be among the biggest spenders on incentives among mass-market automakers, though Volkswagen Group and Honda Motor Co. posted some of the biggest increases in June. (See chart below.)
Odds, ends
- There were 25 selling days last month, down from 26 in June 2019.
- Fleet deliveries are expected to drop 68 percent last month from June 2019, adjusted for selling days, and up 22 percent from May 2020.
- Average new-vehicle transaction prices came in at $36,322 for June, up 3.2 percent, or $1,117, from June 2019, but down 0.2 percent, or $88, from May 2020, ALG said.
Quotable
"As states across the U.S. begin to loosen lockdowns in an effort to bring back economic activity, the world's biggest economy has a long way to go to return to pre-pandemic heights. We estimate that it will take about two years for U.S. GDP to regain its year-end 2019 level, with unemployment remaining high, consumer spending depressed, and business demand recovering only slowly."
-- Beth Ann Bovino, U.S. chief economist at S&P Global
