8/4/2014
By Jennifer Coombs

After a surprisingly robust month of sales back in June, vehicle sales for the month of July disappointed as the sale momentum eased. Sales ended up slowing to a lower-than-expected annual unit rate of 16.5 million vehicles – down 2.4 percent from June's revised number, and recovery high, of 16.9 million. The slowdown was not concentrated in any one area of sales; all categories were hit including foreign-made and domestic-made vehicles with the latter coming in at a 13.2 million rate for a 1.6 percent decline over last year. The decline was also reflected in the motor vehicle component of the monthly retail sales report, which declined for the second month in a row. The retail report noted a 0.3 percent decline in sales on the June report, although auto sales in general appeared strong.

Across all of the major automakers, sales still seem to be quite robust, albeit at a slower pace relative to last month. Below is the year-over-year change in sales for the major automakers, as well as the number of units sold during the month of July.

In July, General Motors continued to outpace its closest competitor, Toyota, selling more cars than any other automaker despite the millions of recalls announced over the past few weeks. GM may have dodged a big bullet with the decisive action the company took to recall cars for what often seemed like almost trivial reasons. Whatever the ultimate impact that recalls will have, General Motors continues to lead all other automakers with a 17.9 percent share of the market. Toyota sold 215,802 units in July compared to 193,000 units a year ago – an increase of 12 percent year-over-year. The average transaction price for the sale of a new Toyota rose 1.8 percent year-over-year as well, and the company maintained its market shares at 15.1 percent. Ford was forecasted to sell up to 213,000 units in July, but ended up selling only 211,467. Sales in the F-Series pickups division remained strong even though the company is preparing to roll out the aluminum-bodied version of the truck later this year. The higher sales of SUVs and trucks at Ford are encouraging given the current gas-price woes. Ford currently dominates about 14.8 percent of the total U.S. market. The U.S. division of Honda Motor sold 135,908 units in July and the company still holds a 9.5% share of the U.S. market; however that has dropped nearly 4% year-over-year. Average transaction price is also down 1.4% year-over-year. Nissan posted growth of about 12.6 percent year-over-year, although the not-so-good news for the company is that its transaction price dropped 3.7 percent year-over-year.

The biggest loser continues to be Volkswagen AG (VW), which sold just 49,469 units in July which is a decline of 5.4 percent year-over-year and 6.1 percent from June. VW holds just 3.5 percent market share, but the company was able to hold the line on pricing, with a gain of 2.7 percent in its average transaction price. However, the Audi division’s sales increased over 13 percent from last year, while VW sales dropped 13 percent. This could also be indicative of a shift towards luxury brands, which should point to further economic recovery.

Overall, we note that the month of July was good, but not great. Companies that posted the best gains were those that had new or refreshed models for sales, and it’s interesting to note that the American consumer is going after the concept of “new.” The seasonally adjusted annual rate (SAAR) of sales fell from around 17 million to around 16.8 million – this is still significantly higher than last year’s July SAAR of less than 16 million units. As the chart below indicates, the dip in the SAAR is relatively minor as sales are almost back to pre-recession levels. Some analysts are a bit worried about sub-prime lending in the auto space, since sales are increasing, but access to financing has eased up. As a result, there is a very slight possibility for a bubble in new car sales, but for the moment we will remain vigilant and not be overly concerned.

Jennifer Coombs
Wall Street Strategies

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