July U.S. Auto Sales Fall Sharply
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What is the main topic discussed in this episode?
This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm Charlie Turner in New York. U.S. automaker sales fell sharply in July as companies cut back on lease deals that kept monthly payments low. General Motors led the way down with GM sales falling more than 15 percent, as has been the story for quite a while. While SUV and pickup sales remained strong, sales of sedans and other passenger cars continued to struggle amid low gas prices. Joining us from Detroit is Wall Street Journal reporter Mike Kolias. Mike, I thought July was supposed to be a strong selling month for car companies. What exactly is going on here?
Yeah, I think what you're seeing is just a continued sort of running out of steam on the consumer's part.
Why did U.S. auto sales drop sharply in July?
I The auto industry has always been a cyclical one. We're coming off of seven straight years of increases since the recession. That's really unprecedented, including the last two years have been record highs of about $17.5 million. So this year, we're down from that. It's probably going to be around $17 million once the year ends.
How did GM, Ford and Chrysler performances differ in July sales?
Still not bad. Still pretty good. Still in the top five years of all time. So just a point of clarity that this is not sky is falling kind of stuff just yet. I mean, I think if you ask any auto executive, they probably in the $15.5 million range and above they would take, and we're still – well north of that. But there's no question that, you know, if there was any question coming into this year whether or not we'd set another record, I think we've answered that one. There's probably no chance that that would happen.
How much is it believed at this point that July sales fell compared to a year ago?
We're in the 5% to 6% range it's looking like, and the Detroit companies are far worse than that.
Are sedans losing ground to SUVs and crossovers?
You mentioned GM's 15% drop. Ford was about 7.5%. Chrysler was worse than that. I think what's happened here is sedan sales have been tough for everyone. All the consumers are moving away from cars. cars and towards crossover vehicles, SUVs. The truck sales for the Detroit companies, especially GM in the month, were really surprising because they fell off steeper than expected. They were pretty flat for Fiat Chrysler. Ford still did okay, but those big pickup trucks that really fuel the profits of the Detroit companies fell off in July, and that was a little bit unexpected.
Haven't inventory levels ballooned? There are a lot of unsold vehicles on dealer lots.
How have dealer inventory levels changed and why does it matter?
Yeah, it's becoming a little bit more of an issue. So GM kind of skews things, though. I mean, normally you'd want to see a 60- to 70-day supply of cars on dealership lots. GM, for several months in a row now, has been running over 100. And there's some reasons for that. And they've been saying for months now, they've been telling Wall Street, listen, we've got a handle on this. We're building ahead of time, because in the fall, we're going to take down several factories to get ready for some new products that we're building. We need these dealership lots to be stocked before that happens, in advance of that. By the end of the year, you'll see our inventories fall to normal levels. So far, you wonder whether or not investors believe them, because the GM stock today really got hammered.
It was down close to 4% at one point. And so I think that that's a concern. You know, investors are sort of I think the jury's still out on whether or not they're really going to bring those inventory levels down back to normal levels in coming months, because if they don't, they're going to have to add on big discounts. That hurts profitability and that could pressure the stock as well.
I'm speaking with Mike Collias of The Wall Street Journal. He's joining us from Detroit. And you're listening to Your Money Matters. Thanks for listening, everyone. Mike, you quoted J.D. Powers saying manufacturers typically pull back on sales incentives after the July 4th holiday, but because of inventory levels being elevated and sales being down, it's compelled the automakers to maintain aggressive discounts throughout July.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:02–0:46
2
Why did U.S. auto sales drop sharply in July?
0:46–1:13
3
How did GM, Ford and Chrysler performances differ in July sales?
1:13–1:54
4
Are sedans losing ground to SUVs and crossovers?
1:54–2:37
5
How have dealer inventory levels changed and why does it matter?
2:37–4:06
6
Why are automakers keeping incentives high despite falling volumes?
4:06–5:38
7
Is now a good time to buy a car given current discounts and model-year changes?
5:38–6:17
8
What are the outlook and likely trends for auto sales and incentives for the rest of the year?
6:17–6:35
Speakers
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