PREVIEW U.S. JUNE AUTO SALES: Retail Demand Continues to Weaken

(Bloomberg) -- Automakers may have had the worst first half for new-vehicle retail sales since 2013, with deliveries to fleet customers taking some of the sting out of weaker consumer demand.

• The seasonally adjusted annualized rate of total sales probably slowed in June to about 17 million cars and light trucks, based on the average estimate in a Bloomberg News survey. The rate in June 2018 was 17.3 million. Most major automakers will release their monthly results Tuesday; General Motors Co. and Ford Motor Co. report quarterly sales.

Key Insights

• Retail sales probably fell 2.9% last month and 3.3% in the first half, according to researchers J.D. Power and LMC Automotive, as more consumers get priced out of the new-vehicle market
• With car and truck inventory hovering near all-time highs, manufacturers are leaning on rental-car companies and commercial buyers to help move metal. J.D. Power and LMC predict that fleet sales rose 3.9% in June, and Cox Automotive says this segment of the market is on pace for a record year
• While sales are slumping, average transaction prices were on pace to reach $33,346 in the first half, the highest ever and up almost 4% from a year ago, J.D. Power said
• Americans' love of SUVs and trucks is helping automakers preserve profits and keep incentives in line. Strong consumer confidence and low unemployment also are helping offset higher borrowing costs. June sales “aren't hitting the same levels they did last year, but they aren't dropping off a cliff either,” said Jeremy Acevedo, an analyst at researcher Edmunds

Analyst Commentary

• Goldman Sachs (David Tamberrino): Fiat Chrysler may continue to have strong Ram pickup sales given an increase in truck incentive spending
  • Says Ford's truck incentive increase was smaller and GM reduced spending from a year earlier
  • Expects steep declines in passenger-car sales for GM (-31%), Ford (-27%) and Fiat Chrysler (-20%)
• JPMorgan (Ryan Brinkman): Expects richer mix of crossover, SUV, and pickup sales to combine with lower incentives in boosting average transaction prices by about $1,600 from a year ago
• RBC (Joseph Spak): Fiat Chrysler's Ram incentives “look very aggressive”
  • GM is still rolling out new double and regular cab trucks and faces a tough sales comparison, as the company was clearing old crew cab pickups a year ago

  To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

  To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Melinda Grenier

  ©2019 Bloomberg L.P.

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