HMC Honda Motor Co Ltd

Traffic cools after six years of steady growth; spending increases on rebates and discounts

By Anne Steele and John D. Stoll 

Light-vehicle sales sputtered in the U.S. last month despite generous Labor Day holiday deals, with most of the market's biggest sellers reporting declines from the prior September.

While the pace of sales remains historically strong, dealership traffic is cooling after more than six years of steady growth. General Motors Co., Ford Motor Co., Fiat Chrysler Automobiles NV and Honda Motor Co. posted declines. Toyota Motor Corp. and Nissan Motor Co. notched gains.

Retail demand has eased from a robust clip set in the final six months of 2015. To keep North American factories running at full steam and on pace for a record, auto makers have cranked up spending on rebates and discounts and relied more heavily on fleet customers, including rental-car companies, government agencies and commercial clients.

Industry competitors spent nearly $400 more on incentives per vehicle on average in September compared with a year earlier, and incentives of $3,888 per-unit sold on average topped the prior incentive-spending record for a single month set in December 2008, according to J.D. Power. The last time incentives-per-unit were this high, GM and Chrysler were appealing to Congress for bailouts and sales across the industry were sinking.

The industry is in better shape seven years later, particularly as buyers opt for heavier models that typically deliver bigger margins. The incentive-spending increase, however, wipes out the premium that auto makers are collecting as customers take advantage of low gasoline prices and shift toward pricier trucks and sport-utility vehicles.

In an interview, Nissan's U.S. sales chief, Judy Wheeler, said there is room to run on the truck side of the business as vehicles from big pickups to small crossovers remain hot. The Japanese brand launched its October "Truck Month" advertising during American football broadcasts last weekend. Ms. Wheeler credits a healthy real-estate market and favorable economic conditions, in addition to cheap fuel, for truck popularity.

In a conference call, Ford U.S. sales chief Mark LaNeve noted "very aggressive" activity around Labor Day throughout the industry. The average vehicle was marked down more than 10% during the month, TrueCar Inc. estimates, which exceeds what it typically has been and reflects ample inventory sitting on dealer lots.

Bill Fay, the chief of the Toyota brand in the U.S., said Monday that some of the incentive spending comes as car companies slash prices on 2016 model-year vehicles to make room for 2017 models. He expects the industry volume to flirt with a record as customers appear to be interested in making a deal.

"I would hope for a strong fourth quarter where there are a lot of reasons for people to buy," he said. GM, for instance, is offering to finance Chevrolets for 72 months with a 0% interest rate through Oct. 10.

Brad Sowers, owner of Chevrolet dealerships near St. Louis and Jefferson City, Mo., said: "We're feeling pretty good about the finish to the year, as long as the election doesn't screw it up too much."

Ford's Mr. LaNeve said retail sales, which strip out fleet deliveries and reflect activity among individual consumers, fell 1% compared with the same period a year earlier. He added that September 2015 was among the best performances in the industry's history, making it tough to top.

Including fleet sales, September volume slipped below 1.5 million for the first time since February, declining 0.5% compared with the prior year, according to Autodata Corp. The firm said the rate for seasonally adjusted annual sales was 17.76 million, among the highest for 2016 but far behind the SAAR of 18 million notched in September 2015.

GM's sales slipped 0.6% to 249,795 vehicles amid a continued reduction in fleet sales and falling pickup sales; its once-dominant market share is now below 17%. Ford, also pulling back from fleet sales during the month, skidded 8.1% to 203,444 vehicles.

Fiat Chrysler edged down 0.9% to 192,883 vehicles as the Jeep brand posted a 3% decline. Toyota's overall sales rose 1.5% to 197,260 vehicles amid solid truck sales, a trend that Nissan rode to a 4.9% increase to 127,797 vehicle sales. Honda, meanwhile, reported a 0.1% decline to 133,655 vehicles sold.

Mike Colias contributed to this article.

Write to Anne Steele at Anne.Steele@wsj.com and John D. Stoll at john.stoll@wsj.com

(END) Dow Jones Newswires

October 04, 2016 02:49 ET (06:49 GMT)

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