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U.S. market settles into a comfort zone

Sales of Jeep’s new JL Wrangler, shown, combined with those of the outgoing JK Wrangler to help lift the April total for FCA US 4.5 percent. Light trucks stayed hot in April, accounting for an estimated 68.6 percent of sales.

Thanks to a shortened sales month, higher interest rates and attractive off-lease SUVs bleeding away new-vehicle sales, the asterisk era of auto sales reporting started quietly.

U.S. light-vehicle sales fell an estimated 4.8 percent last month to an estimated 1,357,858 vehicles, despite higher incentive spending and a red-hot market for pickups, crossovers and SUVs.

The estimates were necessary because the market’s largest automaker, General Motors, stopped reporting monthly sales in April, and says it will now only report sales once a quarter. It’s the first major change in sales reporting since the industry switched from 10-day to monthly reports in the early 1990s, and so far, other automakers haven’t followed suit.

Without GM’s numbers, analysts and industry watchers were forced to extrapolate segment and model sales figures.

Despite the asterisk, some things were clear when the dust settled:

The seasonally adjusted annualized rate of sales for April finished at an estimated 17.21 million, the eighth consecutive month that the pace of U.S. sales has stayed above 17 million, despite April having two fewer selling days than it did a year ago.

The market — and automakers — seem to be in a comfort zone. Seven mostly smaller automakers reported increases, mostly in the single digits, with Volvo’s 17 percent rise as an outlier. Most of the larger automakers, including GM*, Ford, Toyota and Honda, had their sales slip by single digits, with Nissan’s 28 percent drop as an outlier on the other end.

Two big automakers, FCA US and Volkswagen, bucked the downward trend and reported single-digit increases. FCA’s 4.5 percent gain came from one place: Jeep, specifically record Wrangler sales with dealers selling the old and new versions side by side. Volkswagen Group of America’s 3.2 percent rise came from the VW brand’s introduction last year of two new crossovers.

Light trucks, including crossovers and SUVs, remain hot as sedans and small cars continue their historic fade-out. Light-truck sales represented an estimated 68.6 percent of all sales in April, still creeping slowly upward as car sales fell to 31.4 percent.

While the overall light-vehicle market may look relatively stable and the trend lines pretty clear, some underlying currents may be conspiring to bring the party to an end.

Affordability remains a potential drag on new-vehicle sales across several fronts, despite intervention from automakers, according to industry watchers and analysts. Edmunds said that the average annual percentage rate on new-vehicle loans in April was 5.6 percent, the third consecutive month the rate was above 5 percent and at levels not seen since the economic crisis in 2009.

ALG says average new-vehicle incentives in April climbed 8.5 percent from a year earlier, yet Edmunds said average new-vehicle monthly loan payments had risen 4.7 percent to $535. Average transaction prices also rose 2.7 percent in April to an industry average of $33,515, ALG said, with consumers’ shift away from sedans and small cars toward crossovers and pickups pushing a significant chunk of that rise.

And as new-vehicle pricing and financing costs continue to increase, AutoNation CEO Mike Jackson says, consumers start looking for alternatives. Jackson said his company noticed growth in used-vehicle sales.

“You have the substitution effect with all these nearly new lease vehicles,” said Jackson. More SUVs are coming off lease, “which is very attractive to consumers on a value basis.”

That could spell trouble for automakers looking for big sales gains, Jackson said.

“I just think it’s unrealistic to say that [new-]vehicle sales at retail are going to grow on top of all that,” he said. “Absent the off-lease vehicles, new-car sales would still be growing.”

April 2018 by the numbers

Total sales

• -4.8%

• Steepest drop since December

SAAR

• 17.2 million

• 8th straight month above 17 million

Automaker extremes

• +17%, Volvo

• –28%, Nissan

Car sales still fading

• 31.4% of total market


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