Automakers submit decrease December U.S. gross sales, weaker 12 months lies forward

DETROIT (P3P) – Most main automakers on Wednesday reported decrease December U.S. gross sales as they stay up for weaker gross sales in 2018 that can take a look at pricing self-discipline in an trade the place client reductions are already at elevated ranges.

The December numbers got here in above analyst expectations, lifting the shares of Basic Motors Co (GM.N), Ford Motor Co (F.N) and Fiat Chrysler Cars NV (FCHA.MI).

Analysts had been additionally happy that GM had minimize its stock of unsold automobiles – a priority for the trade earlier in 2017 – on the finish of December to 63 days provide unsold automobiles, beating its goal of round 70 days provide.

However GM mentioned it expects the trade to promote lower than 17 million new automobiles in 2018, which will probably be decrease than the anticipated tally for 2017 and greater than half 1,000,000 automobiles shy of the all-time U.S. file of 17.55 million models in 2016.

Automakers should cope with an ongoing shift in client choice away from passenger automobiles to extra worthwhile pickup vehicles and SUVs and an inflow of hundreds of thousands of nearly-new, off-lease automobiles which promote at a major low cost in comparison with new automobiles.

Automakers are nonetheless assessing the potential impacts of rising rates of interest and the sweeping tax overhaul handed by the Republican-controlled U.S. Congress final month.

Charlie Chesbrough, chief economist at Cox Automotive, proprietor of the Autotrader on-line car market and Kelley Blue Ebook automobile valuation service, mentioned the group expects 2018 gross sales to hit 16.7 million models and rising rates of interest are one of many trade’s challenges this 12 months as they improve month-to-month automobile funds.

“That’s actual cash to customers,” Chesbrough mentioned on a convention name.

Ford chief economist Emily Kolinski Morris mentioned on a convention name that rates of interest are a “headwind, however a really minor one.”

Tax cuts, nonetheless, must be a “web constructive” for the trade, she added.

Scott Keogh, U.S. head of Audi AG (NSUG.DE), mentioned that whereas tax cuts would assist luxurious customers, new federal limits on native and state tax deductions might damage gross sales in New York and Los Angeles, the 2 largest American luxurious car markets.

Client reductions additionally stay a priority for the trade. Reductions of greater than 10 p.c of a car’s sticker worth can damage resale values, in flip weighing on new car gross sales. In December, auto consultancies J.D. Energy and LMC estimated reductions had topped 10 p.c for the 17th time within the final 18 months.

Mark Wakefield, world co-head of automotive and industrial consulting at consultancy AlixPartners LLP – which expects U.S. trade gross sales to drop to 16.6 million in 2018 – mentioned to date excessive reductions haven’t damage automakers an excessive amount of, however pricing self-discipline is an actual concern transferring ahead.

“What we’re actually nervous about is that if somebody defects and provides $1,000 to the hood… and forces others to answer defend market share,” Wakefield mentioned.

GM reported a three.three p.c drop in gross sales in December, pushed by a decline in lower-margin fleet gross sales to authorities companies and rental automobile firms. GM’s retail gross sales had been up 1.eight p.c.

The automaker mentioned its common transaction worth hit $35,400 in 2017, above the trade common of $31,600.

Ford reported a zero.9 p.c improve in gross sales for December, fueled by a 17 p.c improve in fleet gross sales. The No. 2 U.S. automaker mentioned its retail gross sales had been down four p.c.

In afternoon buying and selling, GM shares had been up 2.four p.c, Ford shares had been up 1 p.c and Fiat Chrysler was up 2.eight p.c.

Fiat Chrysler posted an 11 p.c gross sales lower, with retail gross sales dropping three p.c. Fleet gross sales slumped 42 p.c, consistent with an organization technique during the last 12 months to chop again on this low-margin method to unload product.

Toyota Motor Corp (7203.T) mentioned its gross sales fell eight.three p.c in December, with decreases throughout all segments.

Honda Motor Co Ltd (7267.T) posted a 7 p.c drop in gross sales in December, pushed largely by declining passenger automobile gross sales.

Nissan Motor Co Ltd (7201.T) reported a 9.5 p.c drop in gross sales.