Ford, Fiat Chrysler sales trail estimates as US slump persists

[SOUTHFIELD, Michigan] Ford Motor Co and Fiat Chrysler Automobiles NV's US light vehicle sales fell more than analysts estimated in July as industrywide demand continues to slide from last year's record results.

Ford's light-vehicle sales declined 7.4 per cent and Fiat Chrysler's dropped 10 per cent, both bigger decreases than analysts projected in a Bloomberg News survey. All major automakers were expected to report slumping deliveries as both regular consumers and rental companies cut back on car purchases.

After seven years of US auto sales growth, this year's persistent slump - and anxiety over upheavals from electrification, autonomy and mobility services - has investors shunning automakers as benchmark stock indexes graze record highs. Tempered spending on vehicles and car parts has been a drag on economic growth in five of the last eight quarters, according to the Commerce Department.

"Auto sales have peaked, they peaked almost six months ago, and they probably don't drive the consumption that much anymore," Krishna Memani, chief investment officer at Oppenheimerfunds Inc, said on Bloomberg Television.

Shares of most major automakers have trailed benchmark US stock indexes this year. The exceptions have been Fiat Chrysler, which is poised to benefit from the shift in consumer tastes away from cars toward pickups and sport utility vehicles, and Tesla Inc, which has soared in anticipation of the more affordable Model 3 sedan.

The annualised pace of total light-vehicle sales likely slowed to 17 million in July, according to the Bloomberg News survey of analysts. The projected rate, which is adjusted for seasonal trends, would be down from 17.9 million a year earlier, though it would also be the fastest rate since February.

With vehicle inventories bloated, profit-eroding discounts may need to rise further in the second half of the year to keep the sector chugging along even at a reduced speed. Instead of paring incentives after the July 4 holiday weekend like usual, automakers left them high throughout the month and still didn't have great sales to show for it, said Thomas King, a vice president with market researcher JD Power.

Compared to this time last year, "we're starting off at higher incentive levels, we've got even more elevated inventory levels and even worse inventory-quality problems" heading into the end of the model year, he said.

The average vehicle incentive jumped US$279 in July from a year earlier to US$3,876, while the average retail transaction price crept up only US$42 to US$30,772, JD Power estimated, based on data from the month's first 18 selling days. That means automakers are discounting more to move metal and aren't wholly making up for it by selling more lucrative models.

One bright spot in the month likely was the full-size pickup segment. Sales of those profitable workhorses slipped only 0.8 per cent compared with double-digit declines for compact and mid-sized cars, according to estimates from Kelley Blue Book.

Deliveries for Ford's F-Series rose 5.8 per cent, while Fiat Chrysler's Ram brand sales were little changed from a year earlier.

"New home construction, and the real estate market in general, has been steadily improving and has even surpassed pre-recession levels in some parts of the country," Tim Fleming, analyst for Kelley Blue Book, said in a statement. "A strong real estate market, especially with regard to new home construction, in conjunction with low fuel prices, generous incentives and improved product offerings will help to keep truck sales strong."

BLOOMBERG