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Analysts from Cox Automotive and its brands provide their thought

Cox Automotive Industry Commentary

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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.

Below is written commentary from our industry experts covering a range of topics including sales volume, OEM and segment performance, shopping trends and incentives.

From Rebecca Lindland, executive analyst for Kelley Blue Book:
“The market continues to contract as expected, so there’s no need to panic if the headlines are breathless about a decline. Instead, consumers should think about replacing older, less fuel-efficient and less safe vehicles with a new car or truck it’s a great time to buy and there’s a lot of new technology in vehicles that wasn’t available five, let alone ten, years ago. Some automakers particularly on the domestic side ­ have already started rationalizing sedan offerings, and tough calls may need to be made in short order. There’s very little indication consumers will shift away from SUVs in the future.”

Lindland on Ford: “Ford is living and dying by the F-Series, which isn’t a bad thing but also means their eggs are all in one basket. The Escape finally broke into the positive, but considering it’s in a very hot segment with ever-increasing competition, its performance is still lukewarm.”

Lindland on GM: “GM needs to consider applying tough love metrics to some car lines. The numbers are just bleak. The Chevy Colorado midsize pickup truck outsold the Camaro, Impala, Sonic, and Spark combined in July. Cadillac car sales aren’t any better the aforementioned Spark (764 units) and Cadillac ATS (777 units) had almost exactly the same number of sales in July. Ouch.”

Lindland on FCA: “There was a lot of concern when FCA killed off the Chrysler 200 and Dodge Dart, but given the continuing decline in car sales, they may have been ahead of the curve with paring down offerings. It appears the Jeep Compass changeover is finally gaining momentum, posing an 8 percent increase and hopefully shoring up the significant gap in volume resulting from the Patriot cancellation.”

From Akshay Anand, executive analyst for Kelley Blue Book:
“The story for July is nothing new. SUVs are up, cars continue to decline, and sales are clearly done growing at breakneck speeds. It’s promising to see some manufacturers unwinding fleet sales for long-term health purposes, but incentives bare watching, as they are still at or near high points for many vehicles. Ironically, it’s actually a stellar time to buy sedans because of some of these incentives, but consumers may not care as long as small SUVs continue to be within their budgets. Regardless, the industry remains in a healthy position, consumers continue to buy new vehicles, and the industry continues to march forward as product continues to get better and better.”

Anand on Ford: “Much of Ford’s decline was due to unwinding of fleet sales. This is a strategy being undertaken by several manufacturers for long-term health purposes. Regardless, the story remains the same – SUVs up, cars down. With sales plateauing, this trend isn’t going away. Luckily for Ford, they do have strong SUV products to make up for continually declining car sales.”

Anand on GM: “As consumers continue to flock to SUVs, manufacturers have started to assess the viability of some of their sedans. GM is no different, and July sales show why. SUVs continue to dominate and show no signs of slowing down, while sedans continue to struggle. Of note are Bolt sales which clocked in at just under 2,000 units. All of the hype recently has been around the Tesla Model 3, and the Bolt will likely need strong sales performance to compete.”

From Karl Brauer, executive publisher for Autotrader, Kelley Blue Book and Dealer.com:
“There’s no denying the ongoing drop in auto sales, but this is a drop from record levels to near-record levels, unlike what happened in 2009. Brands with fresh and appealing trucks or SUVs continue to do well, many of them seeing record volume on vehicles with high profit margins. After seven years of perpetual growth it’s a tough wake-up call for some brands to face flat or slightly declining sales numbers. Only a few brands are really suffering in the current market, and those are the nameplates that depend heavily on coupe and sedan sales. The rest of the industry remains quite healthy.”

From Brian Moody, executive editor for Autotrader:
“Trucks and SUVs still rule. I believe the success of all-new upcoming sedans like the Honda Accord and Toyota Camry will map out the way forward for sedans in general. Look for more small crossovers or variations on existing models from Chevy, Ford and Jeep in the future. Consumers looking for a great deal should be looking hard at sedans, they’re likely to be priced to move and still provide a good deal of comfort and practicality.”

Moody on Ford: “It’s easy to see exactly what¹s happening with Ford. Sales are down overall, but cars are dragging everything down. Cars as a group are not selling well, especially at Ford. Trucks and SUVs are doing well because consumers associate Ford with trucks and SUVs. Consumers looking for a good deal on an excellent car should visit a Ford dealer and check out the Ford Fusion, Fiesta or Mustang. I expect Ford will start killing off sedan models in the near future.”

Moody on GM: “It’s an SUV world now. Resistance is futile. General Motors says trucks and crossovers account for 80 percent of their sales. Acadia, Equinox, Encore, Envision, Suburban, Tahoe, Traverse and Cadillac XT5 ­that’s called planning ahead. General Motors could easily kill just a few slow-selling sedans and be well-positioned for the near future. One bright spot for sedan lovers ­ Cadillac’s CT6 posted sales increases. As demand for sedans in general diminishes, look for the good ones to rise to the top, CT6 is one of those.”

From Jack Nerad, executive editorial director and executive market analyst for Kelley Blue Book:
“July 2016 was a tough act to follow for automakers, and the domestic-based brands found it impossible to match the results they saw last year in what was one of the hottest sales months in history. As other economic indicators show increasing strength ­ consumer confidence, jobs growth, wage increases ­ the auto industry has been caught in a lull. But that could be because conditions last year were extremely favorable to the auto industry. Now with interest rates creeping up and some muted fears that some consumers are over-extended, the car business has cooled and manufacturers are working hard to close each sale.”

From Jonathan Smoke, chief economist for Cox Automotive:
“The economy and the consumer are not only in good shape, they’re picking up momentum as the year progresses. Interest rates remain low, credit conditions look favorable and healthy. The pull-back in new vehicles sales is not being driven by underlying economic weakness but rather by an oversold automotive market.”

From Brad Korner, general manager for Cox Automotive rates and incentives:
“While incentive levels remain relatively high on slow-turning product such as sedans and alternative-fuel vehicles, one trend we’re watching this summer is an increase in dealer cash offered by the luxury auto makers, such as BMW, Infiniti and Mercedes-Benz. These incentives — which is incentive money to the dealer, not the buyer — provide the flexibility to structure appealing deals for slow selling inventory. This is a sign that aggressive incentives are an industry-wide norm, not just a tool for the mainstream auto makers.” (Cox Automotive’s AIS Rebates is an industry leader in rebate and incentive research, publication and analysis.)

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