Automakers battered in February as US sales drop
Most automakers were battered in February as American consumers pulled back on new car purchases, a continued hangover from the brisk sales pace last year, according to data released Thursday.
The three American auto giants reported sales declines: 6.9 percent year-over-year for GM and Ford, and one percent for Fiat Chrysler's US subsidiary. Most other major car makers in the US market saw sales drop last month, but Toyota bucked the trend with a 4.5 percent boost.
Total auto sales declined 2.4 percent compared to February 2017, but dropped 12.7 percent from January. The seasonally-adjusted annual sales pace dropped to 17.08 million units, compared to 17.45 million a year ago.
Analysts had predicted the slowdown, amid an increasing supply of lightly-used cars competing for consumers' spending, and rising interest rates. In addition, record sales in the past two years largely satisfied much of the pent-up demand for new vehicles left from the recession years.
Economist Charlie Chesbrough of the analytics firm Cox Automotive said the weakness "was not surprising," although the disappointing showing by the crossover and pickup segments was a surprise.
Sales were down for some very popular truck models -- such as the Chevrolet Silverado (off 16.3 percent) and Ram trucks (down 14 percent) -- suggesting consumers may be waiting for the newly redesigned versions that were announced earlier this year.
FCA US highlighted that its redesigned Ram 1500 truck will begin production in March, while Chevrolet's popular truck will go on sale in the fall.
Despite the weakening demand, automakers were offering fewer deals last month. The industry's average new car transaction price was two percent higher than last year at $35,444, according to Kelly Blue Book.
Even so, industry analysts remained optimistic that consumers will return to showrooms, even if sales do not match previous years' levels.
"January, February do not the whole year make. They are low selling months," cautioned analyst Michelle Krebs of Autotrader. "We may see some improvements from where we are now, in the spring."
Consumer confidence remains strong and refunds will trickle in over the next few months. In addition, the recently-passed tax cuts were taking effect, with consumers likely to see more money in their paychecks each month, analysts said. While that could improve new car sales, analysts expected competition from used cars to become more formidable. Some 3.5 million vehicles leased during the boom of the last few years are expected back on the market, Krebs said.
"Consumers who are on a budget may not need the brand-new technology. Maybe the three year-old one isn't much different than the (new) one on the market now," she said.
Adding to the pressure on new cars, interest rates for car loans went up in February, according to analytics firm Edmunds. Rates averaged 5.2 percent compared to 4.9 percent in 2017 -- slightly raising monthly payments.
“Car shoppers tend to have tunnel vision when it comes to their monthly payments," said Edmunds analyst Jessica Caldwell.
The pressures weighing on consumers upended industry narrative that the popularity of trucks and SUVs is a bulwark against declines.
The oversized models could not save Ford or GM in February, but the Jeep brand was credited with minimizing declines for Fiat Chrysler.
Toyota managed a sales bump year-over-year -- due not only to its popular Rav4 sports utility (up 13.3 percent), but also to robust sales of its Camry sedan (up 12.2 percent).