U.S. light-vehicle sales, behind strong light-truck demand, higher fleet shipments and elevated incentives, edged up 0.4 percent in October, signaling the second-half slowdown that began in July is moderating.
The seasonally adjusted, annualized sales rate for October came in at 17.59 million, the highest of the year, and well above forecasts for 17.3 million, but down from 17.9 million in October 2017, when demand soared following Hurricanes Harvey and Irma. October marked the eighth month in 2018 the annualized pace of sales has topped 17 million.
U.S. auto sales in 2018 have risen 0.5 percent through October but analysts still expect the second-half slowdown to continue. Volume skidded three straight months beginning in July, with the September decline—5.5 percent—the largest of the year.
FCA US and Toyota Motor Corp. posted higher U.S. sales, propelled by strong truck deliveries, but General Motors, Ford, Nissan and Honda volumes slid behind the ongoing slump in car demand.
"Many signs in the economy would suggest that vehicle demand should be moderating—higher interest rates, import tariffs, weak housing market, stock market volatility, elevated gas prices—yet vehicle buying remains strong," said Charlie Chesbrough, senior economist for Cox Automotive.
Ford, citing data for October from the University of Michigan's Consumer Sentiment Index, said U.S. shoppers are relatively confident about economic conditions, albeit slightly less so than in September.
The number of respondents in the Consumer Sentiment Index saying that it was a good time to buy a car fell 8 points from September to 59 percent, on higher concerns about vehicle prices and interest rates, Ford said.
"Interest rates are taking payments up along with our transaction pricing. So little bit of pressure there," said Mark LaNeve, Ford's vice president for U.S. marketing, sales and service.
U.S. sales at GM, which reports results on a quarterly basis instead of monthly, were forecast by analysts to drop 6.7 percent in October, in part on weaker car demand. The Automotive News Data Center estimates GM's sales dropped 5.3 percent last month and are off 1.6 percent for the year.
Sales at FCA US rose 16 percent in October behind another big month at Jeep and Ram, and strong fleet shipments.
Volume rose 9 percent at Jeep, 14 percent at Ram, 38 percent at Dodge and 21 percent at Chrysler. It was the 10th month in a row that Jeep volume advanced year over year.
The rise in Dodge deliveries last month reflected a 357 percent surge in sales of the Caravan, the venerable minivan that is sold primarily to fleet customers.
Retail sales totaled 141,200, and fleet shipments were 36,191 last month, or 20 percent of overall volume, FCA said.
At Ford Motor Co., volume dropped 4 percent last month behind lower car and F-series sales. Deliveries fell 3.5 percent at the Ford division and 15 percent at Lincoln.
U.S. sales of the F-series pickup, the nation's top-selling vehicle, dropped 7.3 percent last month and car volume skidded 17 percent, Ford said.
Ford's U.S. retail volume declined 4.9 percent and fleet shipments dipped 1.2 percent.
Toyota Motor Corp., helped by a 6.8 percent rise in light-truck volume, said October sales rose 1.4 percent, with volume up 1.7 percent at the Toyota brand but down 0.8 percent at Lexus. Combined car deliveries at Toyota and Lexus fell 7.2 percent.
Another weak month for car demand resulted in an 11 percent decline at Nissan Motor Co. in October, with sales off 13 percent at the Nissan brand but up 15 percent at Infiniti. Nissan said combined car sales at Nissan and Infiniti skidded 24 percent last month.
Honda Motor Co. posted a 4.1 percent decline in volume last month, with car sales off 15 percent and truck deliveries advancing 6.5 percent. Sales fell 5.3 percent at the Honda brand but rose 7.3 percent at Acura.
Among other brands, October U.S. sales rose 2.8 percent at Hyundai, 1.6 percent at Kia, 4.6 percent at Volkswagen and 8.4 percent at Mitsubishi. Deliveries dropped 10 percent at Mazda, 14 percent at Mini and 32 percent at Smart.
Audi's U.S. sales fell 17 percent in October, snapping the luxury brand's string of year-over-year gains at 107 months.
Among other luxury brands, October volume jumped 43 percent at Land Rover, 0.2 percent BMW and 4.6 percent at Volvo, but fell 4.9 percent at Mercedes, 80 percent at Genesis, and 8.4 percent at Jaguar—the 13th consecutive month the British marque's volume has skidded year over year.
Easy money fading
While consumer confidence remains high and U.S. employment growth is strong, rising interest rates are making it more expensive for consumers to buy or lease new vehicles. That has prompted some buyers to shift to used cars and light trucks as an era of easy money fades away.
Still, while there is growing consensus that the U.S. new light-vehicle market will decline in 2018 from 2017, it is still expected to finish the year above 17 million for the fourth straight year, an unprecedented stretch. That run included a record 17.5 million sales in 2016.
Although car sales remain on track to fall for the fifth straight year, light-truck demand remains strong, helped in part by elevated incentives and moderate gasoline prices. In October, U.S. car sales slid 9 percent while truck demand rose 5.2 percent.
"The marketplace is very competitive, regardless of segment," AutoNation CEO Mike Jackson told analysts Wednesday on an earnings call. "And affordability is an issue with rising rates for the consumer. You can tell them all day long that these are very attractive rates. All they know is money used to be free and now they have to pay for it. So that's an adjustment period that they're going through."
J.D. Power says average new-vehicle incentives were tracking at $3,742 in the first few weeks of October, down from $3,885 in October 2017. ALG estimates average incentive spending per new vehicle dropped $103, or 2.8 percent, to $3,609 last month compared with October 2017. And the ratio of average incentive to average transaction price is expected to be 10.6 percent, down from 11.1 percent a year earlier. The Detroit 3, along with Nissan, continue to be the biggest discounters, with October incentives averaging more than $4,000 a vehicle, ALG estimates.
Days to turn, or the average number of days a new vehicle sits on a dealer lot before being sold, was 69 days through Oct. 21, down five days from October 2017, J.D. Power says.
There were 26 selling days last month, one more than October 2017.
Fleet volume is expected to drop 2.3 percent yet account for 22 percent of all light-vehicle sales, up from 21 percent in October 2017, J.D. Power says.
The average new-vehicle retail transaction price in October is on pace to reach $32,947, an all-time monthly record, Power says. The previous high for the month of October—$32,449—was set last year. Kelley Blue Book estimates the average transaction price for light vehicles in the United States was $37,007 in October, an increase of $1,118, or 3.1 percent, from October 2017, while mostly flat from September.
Hannah Lutz contributed to this report.