Cox Automotive Industry Commentary: Sales Day July 2018

Each month automotive industry experts from Cox Automotive and its brands host a sales day commentary call to provide insights into the previous month and to answer media questions related to market movement. The audio for the most recent call which covers the July selling month is available.

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Automakers reported July 2018 sales earlier today, with the market coming in softer than the Cox Automotive team had forecast. With sales now confirmed from other makers, Cox Automotive is estimating that General Motors sales in July were down from year-ago levels. We had initially forecast GM sales to increase versus July 2017.

Please find below commentary from the team at Cox Automotive. 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 let us know. We would be happy to help.

From Michelle Krebs, Executive Analyst for Autotrader:

The massive drops in July car sales demonstrates we haven’t hit rock bottom yet—even Honda and Toyota car sales plummeted. Accord and Civic were down double digits; Toyota Camry dropped nearly 20 percent. One driver of the continued decline is likely the plethora of used cars and, more importantly, nearly new utility vehicles coming off lease and back into the market. As affordability becomes more of an issue, used vehicles provide a value alternative to new sedans.

From Rebecca Lindland, Executive Analyst for Kelley Blue Book:

While sales were down overall year on year, the industry continues to be at high levels, so we have to keep slightly weaker sales in perspective. We’re seeing particularly strong demand on luxury, although the strength is heavily incentivized. Interestingly, recent data from Kelley Blue Book shows “affordability” trending upward as a “most important” factor for luxury shoppers, so transaction price increases may be affecting even the most wealthy buyers.

From Karl Brauer, Executive Publisher for Autotrader and Kelley Blue Book:

It feels like the primary forces at work in the current new car market, including supply, demand and pricing, are pushing transaction costs to a level some buyers aren’t willing to pay. We saw high fleet sales from a number automakers in July, but even that wasn’t enough to hit positive overall numbers in July.

From Akshay Anand, Executive Analyst for Kelley Blue Book:

Nissan has had strong growth over the last several years, but at least part of that was due to fleet sales and incentives. Therefore, part of July’s drop may have been an unwinding in fleet and incentives in order to balance longer term health and profits. However, the dips in Frontier and Rogue were fairly substantial, and the situation bears watching in the coming months.

The big news for Honda is Civic’s big drop. The Civic has been a shining star in an environment where cars are hurting immensely, but July appeared to buck that trend. In fact, with the disparity in SUV and car sales for all brands, it’s fair to wonder if the CR-V is the new poster child for Honda and all it has to offer. The Civic will be a big story in the coming months as a thermometer for car sales, because if it continues to dip, it could be a sign the disparity between SUVs and cars could be bigger than we even expected.

From Jonathan Smoke, Chief Economist for Cox Automotive:

While the overall market is down, we do believe there is strength in retail sales. Two factors are driving this surge in retail demand. First is the strong economy and the impact of tax reform that has boosted disposable income enough to overcome the effects of marginally higher interest rates. The second factor, fear of higher auto prices due to the threatened auto tariff, is effectively moving up purchases that would be happening later in the year. In the face of this surge in retail demand, however, is tight supply. The average days in inventory (how long vehicles sit on dealers’ lots before being sold) is starting to recede for the first time this decade.

From Charlie Chesbrough, Senior Economist for Cox Automotive:

Reported sales generally came in weaker than we had forecast for July. This has been a hard market to predict, as the economic indicators – consumer confidence particularly – are very good.  At the same time, we have always felt that sales would begin trending downward in the second half. July might indicate the market has finally taken the turn we’ve been expecting.

From Brad Korner, general manager for Cox Automotive Rates and Incentives:

Incentives spending in July was relatively restrained, as dealer inventory appears to be at a comfortable level, a sign automakers are managing production well in the post-peak era. Regional incentives are still being used by OEMs where market share battles are heaviest. This use of regional, VIN-specific, conditional offers are smart, strategic investments by OEMS to apply incentives as necessary, protecting margins on the remainder of the transactions. New 2019 models in popular vehicle segments are selling with little or no cash offers.