New vehicle sales barely increased in the second quarter

DDetroit — U.S. new vehicle sales increased only slightly in the second quarter, despite deeper discounts and slightly lower prices.

But stronger sales could be on the horizon: auto industry analysts say they expect prices to fall further and there is a possibility that interest rate cuts This would make taking out a loan for a new vehicle more affordable.

Overall, U.S. sales rose just 0.1% compared with a year ago as still-high prices kept many potential buyers out of the market, according to preliminary data released Tuesday by Motorintelligence.com.

Sales took a hit at the end of June when cyberattacks hit software from CDK Global that dealerships use to do sales paperwork. CDK said most dealerships were back up and running Tuesday afternoon, but companies including General Motors said the problem pushed some deliveries into the third quarter.

Analysts say inventories on dealer lots are rising, especially for pickup trucks and other more expensive vehicles.

Discounts vary depending on demand for vehicles, with smaller, cheaper models and gas-electric hybrids generally in smaller supply. Many customers are delaying purchases, imagining that bigger discounts are coming.

“Waiting may be the ideal strategy here,” said Charlie Chesbrough, senior economist at Cox Automotive.

Toyota, which sells many popular gas-electric hybrids, reported a 9.2% sales increase from April to June. Honda’s sales increased 2.7%, while General Motors reported a gain of just 0.3% and Hyundai reported a 1.8% increase. Subaru had a sales gain of 5.4%.

Sales at Stellantis fell 20.7% in the second quarter, with the Ram brand falling 26% and Jeep sales falling 19%. Nissan sales fell 3.1%, while Kia fell 1.6%.

Together, automakers reported selling about 4.13 million new vehicles from April to June. That’s on track to hit forecasts of nearly 16 million for the year, up slightly from last year’s 15.6 million.

Ivan Drury, chief insights officer at Edmunds.com, said interest rates on new vehicles are averaging just above 7%, a high number for people who bought or leased vehicles years ago but now feel they need to replace their vehicles. .

Many, he said, are opting for the few lower-priced vehicles that remain in the $20,000 range.

“The stuff that’s very accessible is where it’s at,” Drury said. “You really need to have an attractive product at an attractive price for it to be commercialized today.”

For example, sales of the Chevrolet Trax compact SUV, which starts at $20,400 excluding shipping, increased 152.7% during the quarter.

Kevin Roberts, director of analytics at automotive website CarGurus, said automakers want to keep producing higher-profit SUVs and trucks when a large share of buyers are after cheaper vehicles like compact sedans.

“We see people increasingly researching affordable vehicles. You’re seeing people looking for less than $30,000,” Roberts said.

The U.S. industry, he said, is at an inflection point where automakers will have to add discounts to bring prices down, or will have to change what they produce to “try to get more attractive prices and try to maintain those inventories.” lighter levels.”

A move toward lower prices, however, could hurt Detroit automakers, which exited the lower-priced small and midsize sedan markets years ago after having trouble making money on the vehicles.

Since the coronavirus pandemic began in early 2020, auto supplies have been tight as shortages of vital computer chips have hampered production. Coupled with strong demand, the lack of cars has driven average prices to a peak of close to $50,000 in December 2022.

But this year, chip supply has improved, production has increased and supplies have increased. In June, dealerships had about 3 million vehicles in stock, 55% more than a year ago, according to Cox.

As a result, average sales prices fell 1% to about $48,400 last month. That’s 3% below the peak of nearly $50,000 in December 2022, but still 20% higher than before the pandemic.

Of the vehicles that stay at dealerships the longest, all are large pickup trucks or SUVs made by Detroit automakers. Stellantis’ Ram 1500 tops the list, remaining in dealerships for 141 days, CarGurus said.

Deals can be made on vehicles that last much longer, Roberts said. For example, 6% of new vehicle sales listings from national dealers are for the 2023 model year.

The previous Tuesday, Tesla reported that its global sales in the second quarter fell 4.8%, with a drop of 6.6% in the first half of the year. The company does not disclose sales in the US. Ford releases its sales figures on Wednesday.