By Anne Steele
Poor weather weighed on U.S. auto sales in February, but did
little to stem Americans' growing appetite for pricier trucks and
sport-utility vehicles.
While several auto makers posted lower-than-expected volumes for
the month, light-vehicle sales rose 5.3% from a year earlier. The
annualized sales pace eased to a 16.23 million adjusted rate, from
16.66 million in January. General Motors Co. and Toyota Motor Corp.
were among the industry's standouts, reporting February gains of
4.2% and 13%, respectively.
Buyers are continuing to favor heavier vehicles that had fallen
out of fashion when high gas prices and a weak economy restrained
consumers near the end of last decade. In February, sales of light
trucks--buoyed by low fuel prices--represented 54.4% of the market,
a level the segment hasn't reached on an annual basis since
2005.
Among German luxury-car makers, BMW AG kept its U.S. market lead
with its February sales rising 14% from a year earlier.
Second-place Daimler AG's Mercedes-Benz reported a 4.5% gain, while
sales for Audi AG rose 5.3%.
Auto executives expect the light-truck gains to hold as long as
gasoline prices remain relatively low. Buyers are shifting to SUVs,
such as the Chevrolet Traverse, from sedans, like the Toyota Camry.
Light trucks and SUVs tend to achieve lower fuel economy than
passenger cars, so the move poses headaches for regulators trying
to enforce more stringent fuel-economy standards.
Auto makers aren't complaining. Light trucks--which include SUVs
and many so-called crossover wagons--generally commands higher
prices and profits than cars. Ford Motor Co. sales analyst Erich
Merkle said on Tuesday the flight to SUVs would accelerate as baby
boomers and younger buyers choose vehicles that offer more
utility.
Alyssa Fall, a 23-year-old loan processor from Valencia, Calif.,
traded in her 2014 Kia Optima hybrid sedan in February for a 2015
Ford Escape SUV. Ms. Fall and her husband Drew are expecting their
first child in July and their 80-pound German shepherd puppy can't
fit in the back of a passenger car.
"It just wasn't happening in the Kia Optima," Ms. Fall said. The
Escape, she said, is "a lot bigger than anything we could have
hoped for."
The Falls took advantage of the Presidents' Day sale last month
at Galpin Ford, using a trade-in deal and low lease price to keep
monthly payments low.
Buyers like the Falls are helping drive up transaction prices in
the U.S. auto industry. The combination of more trucks and higher
sales of luxury cars drove transaction prices to a new monthly
record of $33,229, up 4% compared with a year earlier.
Auto makers have helped make buying an SUV more acceptable. The
Escape is built on the same underpinnings as Ford's Focus compact,
but is roomier. Buyers pay a premium for that extra capacity: the
base price of a Focus is $17,700. compared with $23,000 for an
Escape.
In February, Ford's transaction prices were up 5% from a year
earlier, Mr. Merkle said. At GM, transaction prices were up $2,668
at $34,682 due to a 36% increase in truck sales and sizzling demand
for its SUVs, including the GMC Yukon and Cadillac Escalade.
The higher transaction prices are allowing auto makers to book
bigger profits in North America at a time when key emerging
markets, notably Brazil and Russia, are slumping. However, as
buyers take on bigger payments, they also take on more risk.
Mark Wakefield, a partner at management consulting firm
AlixPartners LLP, said consumers are increasingly using long-term
loans, with terms of seven years, or leases subsidized by the auto
companies to offset the pain of higher transaction prices. So,
while people aren't feeling an immediate pain in monthly payments,
they are feeding a potential bubble.
"It's risky because of the used price," Mr. Wakefield said. "If
a lot of used supply comes online it's going to bring down prices,"
and that will put buyers in a negative equity position for years,
and leave banks and auto-finance arms funding the leases in a bad
position.
Overall, Ford's sales fell 2% over a year earlier amid a decline
in demand for passenger cars and production changeovers for models
including the F-150 truck and Edge SUV. Fiat Chrysler Automobiles
NV and Nissan Motor Co., two of the fastest growing auto makers in
the U.S., released sales figures that missed expectations.
Chrysler, relying on Jeep's breakneck gains, posted a 6% sales gain
while Nissan sales grew 2.7%. Honda Motor Co.'s sales grew 5%
compared with February 2014.
Chelsey Dulaney contributed to this article.
Write to Anne Steele at anne.steele@wsj.com
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