Auto Woes Stay In August: Is A Rise In Store Post-Harvey?

The declining trend in the United States auto sales continued in August too. This weak performance follows despite an extra selling day in the month. Hurricane Harvey hit the sale of new cars and trucks across the Texan Gulf Coast. Most flood-affected areas, including the nation’s ninth-largest automobile market, Houston, faced new-vehicle sale drop to zero and dealerships getting closed. Reportedly, U.S. sales of new cars and trucks fell 2% in August, marking the eighth successive month of decline.

However, under the light-vehicle segment, crossover SUVs performed better than the sedans, thanks to low fuel consumption, comfortable riding and better handling characteristics. This rise in sales of profitable SUVs over sedans suggests a shift in consumer preferences. This indicates a better performance by the automakers which are into selling of light-vehicles in the coming quarters.

Also, heavy discounting and new model launches by the automakers partially offset the sales decline. Though, this is putting the profit margins of the auto makers under pressure.

Among the six major American and Japanese automakers, General Motors Co. (NYSE:GM) and Toyota Motor Corp. (NYSE:TM) recorded a year-over-year sales improvement in August. Also, Nissan Motor Corp’s (OTC:NSANY) sales declined the most, among others.

Now let us take a look at the U.S. sales figures reported by individual automakers.

U.S. Automakers

General Motors recorded 275,552 vehicle sales in August, marking a 7.5% year-over-year increase. Further, retail sales were up 4%, while commercial deliveries improved 19%. This growth was driven by strong crossover sales in all four brands. Also, the company’s inventory level decreased to roughly 85,000 vehicles but it expects to achieve the inventory target by the year-end.

Ford Motor Company (NYSE:F) reported a 2.1% fall in U.S. sales from the year-ago period to 209,897 vehicles this month. For the same time frame, retail sales were down 2.7% to 164,067 vehicles from the year-ago period. Further, the company witnessed a decline in low SUV sales. The reduction in sales is partially offset by Ford’s truck sales, which increased 9.3% to 96,619 units.

Fiat Chrysler Automobiles N.V. (NYSE:F) recorded an 11% year-over-year decline in sales to 172,773 vehicles in August. The retail sales, contributing 80% to total monthly sales, slipped to 7% year over year to 140,379 units. Fleet sales plunged 23% to 35,654 units, in line with the company’s strategy to decrease daily rental segment.

Japanese Automakers

Toyota’s sales went up 6.8% year over year to 227,625 units in August. Sales in the Toyota division increased 8% to 196,824 units. The company set record sales for light trucks and the all-new Camry model. RAV4, a compact sport utility vehicle witnessed a sale of more than 30% to 43,000 units and Highlander sales were up 26%.

Honda Motor Company, Ltd. (NYSE:HMC) recorded a 2.4% year-over-year decrease in sales to 146,015 vehicles in the month. Sales in the Honda Division went down 1.8% to 132,883 units in August. Plus, sales of the Acura Division fell 7.8% to 13,132 vehicles.

Further, truck sales declined 1.4% year over year to 9,211 units and the car sales sagged by 20.1% to 3,921 units.

Nissan reported a 13% year-over-year waning in sales to 108,326 vehicles in August. Sales in the Nissan division also deteriorated 14.8% to 97,340 units. However, sales of the Infiniti Division rose 5.2% to 10,986 units.

Outlook

Per the Wall Street Journal, Hurricane Harvey has caused destruction to approximately half a million vehicles in Texas. However, this loss has enabled most automakers to anticipate a positive outlook estimating an increase in demand of new vehicles to replace the damaged cars and pick-up trucks. Also, demand for auto parts is expected to increase going forward.

This rise in demand will also enable the auto manufacturers to trim their inflated supply inventories and focus on introducing new models to the market. Also, this surge in demand will allow companies to sell their vehicles at lower discounts, resulting in higher profit margins.

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