GM Nissan Beating US Sales Estimates Tempers Inventory Angst

GM, Nissan Beating US Sales Estimates Tempers Inventory Angst

March 1, 2017
Stronger-than projected demand in February may ease concerns automakers will have to deepen discounts or make more widespread production cuts to reduce supply entering a seasonally stronger spring selling season.

General Motors Co. and Nissan Motor Co. posted U.S. sales gains that beat analysts’ estimates, as surging demand for pickups and sport utility vehicles tempers concerns about swelling inventory on dealer lots.

GM said deliveries climbed 4.2% last month, while Nissan reported a 3.7% increase and Ford Motor Co.’s sales dropped less than analysts estimated. The companies were buoyed by consumers snapping up Chevrolet Silverado trucks, Nissan Rogue crossovers and Ford Escape SUVs.

Auto dealers have started the year weighed down by overstocked car lots despite record annual sales in 2016. Stronger-than projected demand in February may ease concerns automakers will have to deepen discounts or make more widespread production cuts to reduce supply entering a seasonally stronger spring selling season.

“This will help the inventory situation,” Jeff Schuster, an analyst with researcher LMC Automotive, said by phone Wednesday. “There’s always an inventory buildup this time of year. I think over the next couple of months, it will work itself out.”

Analysts had projected the industry sales pace slowed last month to a seasonally adjusted annualized rate of 17.5 million light vehicles in a Bloomberg News survey, compared with 17.7 million a year earlier.

Jeep, Lexus Slump

Fiat Chrysler Automobiles NV and Toyota Motor Corp. broke from their peers and posted wider sales declines than analysts estimated for last month. Deliveries dropped 10% for Fiat Chrysler and 7.2% for Toyota, as a down month for the Jeep and Lexus brands weighed on their respective results.

Honda Motor Co. said sales rose 2.3% last month, in line with estimates. Deliveries of CR-V and HR-V crossovers each surged by more than a quarter from a year earlier.

Automakers have supplied dealers as though the U.S. market will keep growing following last year’s record 17.55 million cars and light trucks sold. The inventory glut also is a reflection of the challenge facing the companies to make deep enough production cuts of slumping passenger cars, which Americans are snubbing in favor of SUVs.

Ford’s car sales tumbled by about a quarter last month, offsetting rising demand for its SUVs, pickups and the Lincoln brand. The company’s total deliveries fell 4%. GM continues to reduce its reliance on fleet customers, reporting in an emailed statement that retail deliveries climbed 5%.

Volkswagen AG’s combined deliveries for the VW and Audi brands increased 14%, trailing analysts’ estimates. The changeover to a new design for the Compass model dragged on the Jeep SUV brand, which posted a 15% drop last month.

GM boosted discounts on its full-size trucks early last month, supporting sales of the Chevy Silverado and GMC Sierra models that compete with Ford’s F-Series and Fiat Chrysler’s Ram. The largest U.S. automaker spent 26% more on incentives for each Silverado truck than Fiat Chrysler paid per Ram, and 85% more than Ford allocated for F-Series, according to J.D. Power dealer data obtained by Bloomberg News.

Truck Month’

As GM staged a “Truck Month” promotion in February, Nissan advertised as much as $5,050 off 2017 Altima sedans in some markets. While incentives rose more than $400 per vehicle industrywide last month, according to TrueCar Inc.’s ALG, demand for SUVs and pickups that tend to sell at higher prices lifted the average price consumers paid by more than $600.

“We have seen a structural shift in consumer buying behavior going back to 2010,”  Mark LaNeve, Ford’s U.S. sales chief, told analysts and reporters on a conference call. Passenger cars were about 35 percent of industry sales last month, compared with more than half of deliveries in February 2010, he said. “That’s structural and deep.”

In addition to boosting discounts last month, automakers have already begun to cut production. GM and Fiat Chrysler have eliminated shifts, laid off employees or scheduled days off early this year at plants making slower selling models including the Chevrolet Cruze compacts, Chrysler Pacifica minivans and Buick Lacrosse sedans.

“The automakers are in a tricky spot,” Jessica Caldwell, an analyst at car-shopping site, said. “Aggressive incentives are already starting to eat into profits and residuals, but it takes discipline to pull back the production reins in what’s still a fairly strong market.”

By Jamie Butters and David Welch

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Licensed content from Bloomberg, copyright 2016.

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