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Plummeting U.S. Truck Sales Push Market Down 6.9% for April
2 May 08
Soaring fuel prices are forcing buyers to abandon traditional trucks in droves, but passenger cars are showing considerable strength.
Global Insight Perspective | | Significance | The U.S. auto market fell 6.9% year-on-year to 1.257 million units for the month of April (down 7.7% to 4.824 million for the year-to-date) as soaring fuel prices and depressed fleet sales continue to hammer at the light truck segments. | Implications | Light trucks dropped 17.4% despite increasing sales of CUVs as considerable softness in full-size pick-ups and SUVs continues unabated. Passenger cars (and retail sales) were a region of strength however, climbing 5.2% y/y for the month and surpassing truck sales. | Outlook | Consumers continue to abandon big trucks in droves, and the migration to small cars is now in full swing as fuel efficiency begins to appear at the top of consumers' lists of most important vehicle characteristics. |
Total April 2008 U.S. Vehicle Volume | | | 2008 | 2007 | % change | Month | 1,246,554 | 1,338,603 | -6.9 | YTD | 4,823,846 | 5,226,674 | -7.7 |
The U.S. light vehicle market continued to show weakness for April 2008, as sales dropped 6.9% year-on-year (y/y) to 1.247 million units for the period. Passenger car volume actually increased for the month, but not enough to offset a massive retraction in the light truck market. Passenger car sales grew 5.2% y/y for the month, outselling light trucks for the second month this year, as the trucks saw a remarkable 17.4% slide. For the year-to-date (YTD), the market is now down 7.7% to 4.824 million units, down a full 400,000 units through just the first four months. U.S. April 2008 Light Vehicle Sales by Group | Group | April 2008 | April 2007 | % change | April 2008 | April 2008 | % change | GM | 257,638 | 307,554 | –16.2 | 1,058,014 | 1,205,996 | –12.3 | Toyota | 217,700 | 210,457 | 3.4 | 789,447 | 816,312 | –3.3 | Ford | 200,007 | 227,585 | –12.1 | 781,791 | 867,190 | –9.8 | Chrysler | 147,751 | 193,104 | –23.5 | 601,622 | 730,353 | –17.6 | Honda* | 134,400 | 126,419 | 6.3 | 487,042 | 480,627 | 1.3 | Nissan | 75,855 | 71,124 | 6.7 | 345,600 | 350,104 | –1.3 | Hyundai* | 69,346 | 65,144 | 6.5 | 232,898 | 242,952 | -4.1 | * As time of publication, Honda and Hyundai groups had not yet announced official numbers; data listed is an estimate. |
General Motors (GM) had a mixed message month, with overall sales down 16.2% due to much lower truck sales, but the company continues to post sizeable gains for retail sales. Passenger car models are taking off at GM, especially the newly redesigned ones such as the Chevrolet Malibu (up 39.5%) and Saturn Aura (up 29.1%), and the Cadillac CTS (up 16.4%). Such gains did not translate into GM's trucks however, with the migration from full-size pick-ups and sports-utility vehicles (SUVs) in full swing. Sales of the Chevrolet Tahoe were down 29.4% y/y, while the Silverado pick-up fell 24.7%. Both vehicles are constrained by the ongoing American Axle strike, which is believed to have had a minor impact to GM's fleet sales. Coming in second for the month is Toyota, which posted a decent 3.4% gain y/y to 217,700 units thanks to strong sales of the company's passenger cars. Like the rest of the industry's players however, Toyota experienced a dramatic drop in sales of traditional trucks and SUVs. Toyota's car sales rose 16.2% for the month, as Camry sales climbed 17.0%, Prius Hybrid jumped 66.6%, and Yaris rose 58.1% y/y. But truck sales were not so hot, with the company's Tundra dropping 6.0% and even the typically popular RAV-4 crossover-utility vehicle (CUV) falling 11.9% for the month. Ford turned in a mixed performance as well, with overall sales down 12.1% to 200,007 units y/y. Like GM however, retail sales were dramatically higher for a number of Ford passenger car models. The Focus in particular had a banner month, with sales up 43.5% despite a significant reduction in fleet sales for the model. The Fusion also saw sales up 22.4%, while the Edge CUV continues its popularity as well, rising 13.1% for the month. As with other automakers, trucks saw a significant decline, with the F-Series falling 21.0%, the Expedition down 35.0%, and the Explorer falling 38.5% as well. Outlook and Implications Fuel prices hit truck sales hard in April, as more and more American consumers abandon the traditional segments for small cars. Ford sales analyst George Pipas announced during the company's sales call that inspections of the top ten trade-in models for small cars in April revealed at least one full-size pick-up on the list for nearly every car; proof positive that buyers looking at the segment for personal use or fashion statements simply no longer exist. Encouraging signs for the domestic automakers were the strong retail passenger car sales numbers that were turned in for the month; the generally negative numbers for the Detroit Three do not accurately display the kinds of successes that GM and Ford in particular are having with actually selling their new offerings to the buying public, instead of dumping scores of sedans and compacts into rental fleets. Those daily rental fleets continue to be an increasingly smaller portion of domestic automakers' sales, according to the various sales executives' statements, even in the face of shrinking overall sales numbers for the market. Maintaining that level of discipline in not running plants to dump cars into daily rental fleets even as revenues shrink truly shows how much management at the Detroit Three automakers has changed; no longer will profitability be sacrificed to market share. It should be noted as well that while the truck market continues to shrink, passenger cars are actually starting to sell rather well. Passenger cars solidly passed trucks in the market for April, and is coming closer to passing trucks for the full year as well. Automakers that are more heavily invested in the truck market (the domestic Detroit Three and now, Toyota) are showing the damage being caused by the migration to passenger cars more readily than those with a relatively small proportion of trucks in their portfolio (such as Volkswagen and BMW). To put this in perspective, Chrysler's overall sales dropped 23.5% for the month. Its passenger car sales fell 14.0%, while its truck sales plunged 26.4%. But fully 74% of Chrysler's sales for April were still trucks, compared to just 26% of its sales coming as passenger cars. Ford and GM's numbers are not as relevant, due to the high numbers of car-based CUVs that the companies sell, but the numbers begin to take on added meaning when one realises that Ford posted truck sales declines of 18.1% despite having the second and fourth best-selling CUVs on the market. Global Insight has left the outlook for total light vehicle sales unchanged at 14.9 million units, considerably below what a number of more optimistic automakers are expecting for 2008. April came in as the weakest month in 13 years, with economic headwinds that do not look like they will abate any time soon. Indeed, fuel prices are likely to continue to keep rising in the United States as the summer holiday season and driving season begins in just four weeks. With fuel prices already driving consumers out of the truck market and into small cars, revenues and profits for the Detroit Three are likely to become increasingly strained, and companies like Chrysler which are still incredibly truck-heavy are likely to face considerable pressure.
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