April auto sales are being reported today, with many auto makers posting numbers lower than year-ago levels. At this point, overall April 2019 volume appears to be below our initial forecast of a 1.0% increase over April 2018.
Considering market performance from reporting brands, Cox Automotive is now estimating that Ford, on the strength of its pickup trucks, performed slightly better than our initial forecast of a 6.8% decline. On the other hand, we are estimating that General Motors came in slightly below our forecast of a 1.1% decline. Ford and General Motors do not release monthly sales data.
The Cox Automotive team of analysts and experts offers the following commentary on the industry’s performance this past month.
From Charlie Chesbrough, senior economist, Cox Automotive
April vehicle sales are coming in below expectations with the seasonally adjusted annual rate (SAAR) falling to the mid-16-million range, well below March’s 17.5 million pace and last April’s rate of 17.2. Robust employment conditions and a strong stock market didn’t seem to be enough to lift sales last month. Market forecasters have been expecting the market to slow as higher vehicle prices and higher borrowing costs squeeze many potential buyers. And indeed, the sales lion that surprised many in March became a much weaker lamb in April, as revealed in today’s numbers. Prior to April, retail sales had been in decline while fleet showed gains. Fleet activity, however, appears to have slowed in April, bucking the trend we saw in the first quarter.
From Jonathan Smoke, Chief Economist, Cox Automotive
In April, we again saw auto loan rates drift higher, both in terms of advertised and real rates achieved. With rates at 8-year highs and vehicle prices at record highs, consumers are not finding compelling reasons to buy new vehicles, and retail sales continue to decline as a result. The strength in fleet demand gives manufacturers just enough reason to stay disciplined on pricing and incentives, yet that discipline keeps retail consumers on the sidelines or pushes them to buy used instead of new.
From Michelle Krebs, executive analyst, Autotrader
Fiat Chrysler had a worse month than expected, likely due to lower fleet sales. Only Ram, which outsold rival Chevrolet Silverado in the first quarter, was a standout, with nearly 50,000 Ram 1500s sold in April. Incentives of up to $9,500 on one version of the 2019 Ram Crew Cab clearly was aimed at grabbing share from General Motors as it is ramping up production of its new crew cabs, the most profitable versions of pickups.
Jeep was down, and it may well turn out that credit is tightening, hitting cheap Jeeps, notably the Cherokee and Renegade, that are bought by young, less credit-worthy buyers. Cherokee sales were down again in April, and this week, Fiat Chrysler begins laying off nearly 1,400 workers at the Belvidere, Ill., plant where it makes the Cherokee. Neighboring suppliers are also laying off as Fiat Chrysler eliminates a shift at the plant.
Spring used to be the best season for minivans, but Chrysler Pacific and Dodge Grand Caravan sales were down double digits. Fiat Chrysler recently announced cutbacks at its Windsor, Ont., plant that makes minivans. Within the Dodge brand, only the Durango sport utility had an up month. One wonders how much life Dodge and Chrysler muscle cars have left as baby boomers age out.
And Fiat? We ask again: When will the automaker pull the plug on that brand in the U.S.?
From Karl Brauer, executive publisher and analyst at Kelley Blue Book and Autotrader
The pickup truck segment will play an even bigger role in the market this year. Ram sales continue to roll, putting Chevrolet under huge pressure. Ram outsold rival Chevrolet Silverado in the first quarter, and it may have added to the run with nearly 50,000 Ram 1500s sold last month. GM is not sitting still though, as they are currently ramping up production of their new full-size models.
Sales of the all-new Jeep Gladiator have just begun; expect volume to rapidly increase, cutting into the weaker players as well. At the same time, Ford is beginning to benefit from the new Ranger, which is now hitting dealers across the country. Toyota Tacoma sales were up in April, and an all-new model will launch soon. In comparison, midsize pickups from GM are looking dated. The pickup truck segment is always a fierce battle. This year it looks particularly so.
From Zo Rahim, manager, Economics and Industry Insights
Fleet sales in April appear to have cooled from their impressive run in the first quarter. With overall sales down and fleet moderating, softness in vehicle sales still stems from weakness in the retail market. Affordability concerns coupled with attractive supply in the used-vehicle market might suggest retail sales might not bottom out for the foreseeable future.
From Brad Korner, general manager, Cox Automotive Rates and Incentives:
While overall incentive levels remain mostly below year-ago levels, our team is clearly seeing an upward trend. Inventory levels are rising, and we’re seeing a gradual rise in incentives to match. In April, there was more traffic-driving 0% financing deals offered versus March, and more focus on lease deals. With April sales coming in softer than expected, we believe May will a pivotal month for rates and incentives. Do auto makers hold the line? Or do we see more money thrown at the market to maintain volume?
If you would like to speak with one of the expert analysts from Autotrader, Kelley Blue Book or any member of the Cox Automotive Industry Insights team, please contact us.