U.S. auto sales mixed as second half begins

DETROIT—Auto makers reported mixed U.S. auto sales for July, amid rising incentives and sustained demand for trucks, as the industry kicked off the second half of the year with a slight gain.

Nissan Motor Co. s deliveries rose a scant 1.2 percent. FCA US gained less than a percent and General Motors' sales slipped just under 2 percent. At Ford Motor Co., which warned last week of a rough third quarter, volume fell 3 percent. Sales rose at Honda but slipped at Toyota.

The July results are being scrutinized amid signs consumers are becoming more sensitive to new-vehicle pricing and a growing concern that the U.S. market is leveling off after six consecutive years of gains since the Great Recession. In the first half of the year sales rose 1.4 percent to 8.6 million cars and light trucks.

The new vehicle market has become “very price sensitive,” Mark LaNeve, Ford's U.S. sales chief, said on a conference call with journalists and analysts. He said Ford saw a “fairly dramatic decrease” in lease volume after undertaking “modest increases in our lease prices” in July.

Ahead of the Aug. 2 reports, U.S. light vehicle deliveries in July were forecast to rise slightly from the same month a year ago. The final tally won't be known immediately, however, as Jaguar Land Rover said a technical glitch will keep it from recording sales along with the rest of the industry.

Without July results from Jaguar, Land Rover and Porsche, industry sales were 0.4 percent higher last month compared to July 2015, and just 1 percent higher for the year. The industry faces a tough comparison with the second half of 2015, when sales were notably robust in September, October and November.

“It's clear the industry is plateauing, as we're now seeing signs of SUVs slowing down for several brands, while sedans continue to struggle,” said Akshay Anand, an analyst for Kelley Blue Book. “With incentives continuing to rise faster than average transaction prices, combined with slowing growth, the industry is in a tricky spot."

An additional weekend of sales, July 4 holiday promotions, a rise in incentive spending and strong light truck demand helped drive volume last month, analysts said.

At GM, deliveries slipped 1.9 percent behind a 5.3 percent decline at Chevrolet. Sales rose 4.8 percent at GMC, 10 percent at Buick and 1.3 percent at Cadillac. GM said its retail volume rose 5 percent to 236,235 vehicles.

Ford's decline stemmed from a 3 percent drop at the Ford division and a 4.6 fall in Lincoln deliveries. Ford said its fleet sales rose 6 percent to 55,321 last month while retail demand dropped 6 percent to 161,158 cars and light trucks.

Sales at the Nissan division rose 1.7 percent in July, behind a record 57,794 crossover, SUV and truck sales for the month. Infiniti volume slipped 4.7 percent.

At American Honda, which reported an all-time monthly record of 77,740 truck sales, deliveries rose 4.4 percent for the month. Honda Division sales advanced 5.9 percent to a July record of 139,125 vehicles. Acura sales, however, fell 8.3 percent to 13,674 vehicles.

Even with record light truck deliveries, volume at Toyota Motor Sales U.S.A. slipped 1.4 percent to 214,233 vehicles. Toyota brand sales slipped 2 percent, while sales at its Lexus luxury division dropped 6.5 percent. Sales at Scion, which is being phased out, surged 66 percent.

Hyundai set a July record with U.S. deliveries rising 5.6 percent to 75,003. Kia also marked a July record with volume rising 6.5 percent to 59,969 cars and light trucks.

FCA US posted sales of 180,727—up slightly, or by 603 units—from revised figures for July 2015, behind a 5 percent gain at Jeep and the Ram brand. Volume dropped 10 percent at Dodge, 4.1 percent at the Chrysler brand and 14 percent at Fiat.

Fiat Chrysler, following a 2015 audit, has revised its U.S. sales reporting practices and restated U.S. deliveries back to January 2011. FCA last week said it sold 180,124 cars and light trucks in July 2015, 2 percent more than it first reported.

In the process, the company's 75-month U.S. sales winning streak vanished. FCA said monthly sales actually fell in September 2013, which would have ended its post-bankruptcy run at 41 months.

Volkswagen Group of America, mired in a diesel emissions scandal, saw July sales fall 8.1 percent to 28,758 vehicles at the Volkswagen brand. Audi, behind SUVs, the A3 and the A4, remains hot, recording 81 consecutive months of year-over-year gains. The luxury brand's sales rose 4 percent to 18,364 vehicles last month, a July record.

Among other luxury brands, volume rose 7.1 percent at Mercedes and 53 percent at Volvo, but dropped 4.4 percent at BMW.

At Subaru of America, sales rose 3.1 percent to 52,093 vehicles, a July record. Jeff Walters, senior vice president of sales for Subaru of America, said the company is on pace this year to top 600,000 vehicle deliveries annually for the first time.

The seasonally adjusted annual selling rate for July is projected to come in at 17.6 million cars and light trucks, little changed from July 2015's 17.55 million rate and an increase from June's 16.7 million, a Bloomberg survey of analysts found.

GM on Tuesday estimated the light vehicle SAAR for July at 17.9 million.

The SAAR has averaged 17.2 million a month since topping 18 million in September, October and November of 2015.

TrueCar estimates the average transaction price for a new light vehicle was $32,518 in July, an increase of 1.3 percent from a year ago. Average incentive spending per new-vehicle rose by $159 to $3,225 last month. And the ratio of incentive spending to ATP was 9.9 percent, up from 9.6 percent a year ago.

“While overall national retail spending remains strong and consumer confidence is relatively unchanged, we are probably seeing some attempts in incentive spending to boost auto sales beyond its organic demand,” said Oliver Strauss, TrueCar's chief economist.

While some analysts and auto makers believe low interest rates and gasoline prices, along with rising lease penetration, will continue to support growth, adding to 2015's record volume, others believe pent-up demand has been exhausted.

A decline in used-vehicle prices, spurred by an increase in off-lease vehicles, will also undermine new vehicle sales in coming months, some analysts said.

Jessica Caldwell, head of industry analysis at Edmunds, said auto makers will have to create and promote more attractive financing offers to outperform 2015's sales output. “Zero percent financing deals were much more common last year summer than they are now,” Caldwell said in a statement.

"We're also seeing indicators that lease deals were much harder for car shoppers to come by in July, as lease penetration dropped to 27.8 percent, the lowest level since May of 2015,” she added. “While some of the softness in leasing can be attributed to seasonal fluctuations and the fact that GM's lease penetration dropped below 20 percent, lease customers are very price sensitive and may need a bit more of a nudge than they're currently getting to convince them to close the deal."