Auto sales in June slowed to their weakest pace in a year. But you wouldn't know it by listening to industry executives.
In the meager 7 percent increase over a weak June 2010, they saw the silver lining of pent-up demand. Given the myriad reasons consumers had to sit on their hands last month, the execs predicted a strong second half.
A dearth of incentives meant skittish shoppers weren't cajoled into showrooms. And those who did make it to dealer lots often couldn't find what they were looking for.
Sales at both Toyota Motor Sales U.S.A. and American Honda Motor Co. fell 21 percent, while Subaru dropped 8 percent from year-earlier levels. Those automakers blamed severe inventory constraints related to the March 11 Japan earthquake.
But every other automaker's sales rose, and the major players' sales climbed at least 10 percent.
June light-vehicle sales rose 7 percent to 1.1 million units, after a down May that snapped eight straight months of higher sales. But industry insiders were surprised by a seasonally adjusted annual sales rate of just 11.4 million units, down from 11.8 million in May.
One reason for the lackluster month wasn't related to the quake: Reports on housing, unemployment and consumer confidence all looked bleak.
But the fact that most automakers other than Toyota and Honda had higher sales despite the head winds seems to have emboldened industry execs. Many are predicting a strong second half as inventories eroded by the after-effects of the Japanese earthquake are replenished.
"While we've had these couple of bumps, we believe that the recovery will get back on track," said General Motors U.S. sales chief Don Johnson. He points to "high pent-up demand that's backstopping the industry."
Few incentives
Incentive spending remained at rock-bottom levels in June, an average of $2,300 per car industrywide, according to TrueCar.com. Incentives remain at their lowest levels in nearly six years.
The average transaction price in June topped $30,000 for the first time ever.
Toyota reiterated last week that all of its U.S. plants and models will be at 100 percent production by September.
"We are back in the sales business," declared Bob Carter, Toyota Division general manager.
Discounts could start flowing again as Japanese automakers recover, said Jesse Toprak, TrueCar's vice president of industry trends. Last month Honda, Toyota and Nissan all increased spending, especially lease deals -- a sign they're ready to fight to get customers back.
"We expect incentives to increase strongly from this point on," Toprak said.
He said he believes the perceived shortage of Japanese inventory is partly to blame for the sluggish sales.
Al Castignetti, vice president for Nissan sales, agrees.
"We didn't see the floor traffic we expected all month," he said. "I believe people are thinking that with the low inventories that are available they're going to get gouged, and so they're staying away."
Trucks return
Full-sized pickup sales bounced back, in line with a steady fall in gasoline prices during June. Industrywide, pickups sales rose 9 percent after falling 13 percent in May.
"We're starting to see some stability in fuel prices, which is bringing people back into the market," Toyota's Carter said. "We continue to be optimistic on growth of the market on the pickup side."
Better truck demand helped Chrysler Group, which rode to a 30 percent jump in June volume on sharp demand for Jeeps and a 35 percent jump in Ram truck sales.
Ford said its F-series pickup sales rose 7 percent to 49,618, for one of its strongest months in three years. GM said sales of full-sized GM pickups rose 6 percent from a year earlier. GM's Johnson expects the segment "to steadily increase for the remainder of the year."
Chevy dealer Skip Weber says customers at his four stores in the St. Louis area have reacted much differently to this year's higher gasoline prices that they did during the last spike in 2008.
Back then, many of his customers flocked to fuel efficiency by trading in trucks for cars. This time they sat tight.
"A lot of people this time just chose not to buy a new truck," Weber said. "As gas prices go down, I think it will spur some of that pent-up demand."
April Ancira, vice president of the Ancira Auto Group in San Antonio, said she's optimistic about the summer but worries that the budget standoff in Washington could start to weigh on customers' minds.
"I'm very bullish, especially considering gas prices are steadily dropping," she said. "That's a good sign for the popular summer selling months."
(Source: Automotive News, 07/04/11)
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