HMC Honda Motor Co Ltd

By Adrienne Roberts 

Auto makers reported an encouraging trend for earnings in October, posting strong retail demand for profitable light trucks that is likely to achieve a record level even as overall car and light truck sales are cooling off.

More than 62% of vehicles sold at dealerships during the month were pickup trucks or sport-utility vehicles, estimates to researcher J.D. Power, a shift sparked by fuel-efficiency gains in heavier vehicles and cheap gasoline prices. Overall volume likely sputtered during the month due to fewer selling days compared with October 2015, but the annualized pace likely hit its strongest clip in 11 months.

Actual sales data are still incomplete because Ford Motor Co. delayed releasing its results until later in the week due to a fire at its headquarters on Monday. But most other auto makers reported top-line declines in October compared with the same period a year ago, citing the disparity in selling days. Volumes for the month were down between 4% and 5% excluding the No. 2 seller's results.

The shift to trucks has been accelerating since late 2014, presenting a challenge to auto makers racing to meet more stringent fuel economy standards. Passenger cars, such as midsize sedans and compacts, aren't popular among consumers, but regulators prize their fuel efficiency and lower emissions.

Auto makers, however, are eager to follow the migration to heavier vehicles, which command higher price tags and deliver bigger profits in the U.S. at a time when several other global markets are under pressure and development costs are rising due to regulations and a move to more autonomous vehicles. In a report released on Monday by the Ann Arbor, Mich.-based Center for Automotive Research, researchers estimate every light truck sold in the U.S. generates an average of $6,000 in operating profit for its manufacturer.

The Detroit Three are best known for their pickup trucks, but they are facing stiffening competition. For instance, Nissan Motor Co.'s U.S. sales chief Judy Wheeler said light trucks in its lineup, including the Pathfinder SUV and Titan pickup, registered double-digit percentage sales increases in the month of October compared with the same month last year.

The gains helped the Japanese auto maker reduce its reliance on lower-margin cars, such as the Altima, which require higher sales incentives relative to their sticker price. While acknowledging Nissan still has work to do, Ms. Wheeler noted trucks rose to well over 50% of its U.S. sales in October from 40% previously.

Industry data providers estimated a 17.9 million seasonally-adjusted-annual-selling rate in the month, and said auto sales would have eclipsed last year's tally on a equivalent selling days measurement. A 17.9 million pace would fall short of the 18.1-million rate reported in October 2015, but it is one of the strongest performances of the year and an indication 2016 will finish on a strong note even if overall volumes fall short of last year's record.

Tim Bergstrom, chief operating officer of dealer Bergstrom Automotive in Wisconsin, said October was a strong month and November should be even stronger because additional inventory is expected to be available.

General Motors Co. said its sales overall slipped 1.7% compared with the same time last year, a reflection of its paring of sales to car rental companies. Fiat Chrysler Automobiles NV reported sales tumbled 10% in the month despite a sizable increase in Ram truck deliveries.

Toyota Motor Corp. said its sales fell 8.7%, including a 17% decline in passenger car sales. Nissan sales declined 2.2% despite an 11% rise in truck sales. Honda Motor Co. reported its sales fell 4.2% as car demand slipped 4.9%.

--Anne Steele contributed to this article.

Corrections & Amplifications: The headline on an earlier version of this article incorrectly stated that Ford posted a sales decline for October. Ford hasn't posted its October sales yet.

(END) Dow Jones Newswires

November 02, 2016 02:48 ET (06:48 GMT)

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