Auto Sales Stabilize, but Not for Everyone

Fears of pricey gas hold down sales of big SUVs and trucks as Ford shows the clearest sign of improvement

By David Kiley

Auto sales stabilized somewhat in June. But the pain was spread unevenly among carmakers and the types of vehicles, as fears of gas-price increases continued to slaughter sales of big sport-utility vehicles.

Overall, total auto sales were down 27.7% last month compared with June 2008, according to Autodata. Year to date, sales are down 35.1%. The recession continued to weigh heavily on consumers, as autos sold at an annual pace of 9.7 million vehicles, below the miserable 10 million selling rate forecasted by several analysts for June. As recently as five years ago, the annual sales rate was 17 million vehicles.

Ford (F) posted a decline of just 10.7% in June, the lowest drop of any major automaker. That stood in stark contrast to the fortunes of the two members of the Big Three that sought bankruptcy, General Motors and Chrysler. Chrysler saw sales tumble 48% as it sold practically no vehicles to rental fleets last month and its factories were idled during Chapter 11 proceedings. GM, which is just behind Chrysler in its own bankruptcy reorganization, posted a 33% sales decline. GM sales and marketing chief Mark LaNeve said he is hopeful that GM's Chapter 11 process won't last too long. "People are looking for a quick exit from bankruptcy like Chrysler had," he said.

Small and Midsize Cars Sell Better

Toyota (TM) and Honda (HMC) have not been discounting vehicles as deeply as some rivals and they are paying for it: Toyota's U.S. sales fell 27% and Honda's were down 30%. "Consumers are really focused on price/value right now," says Edmunds.com analyst Jesse Toprak. Nissan (NSANY), though, with higher incentives than its Asian rivals, saw sales drop by only 23%. Subaru continued to impress by posting a 3.4% sales gain June-over-June.

Overall, small and midsize cars did better than larger vehicles last month as a new frugality settled in with consumers. Combined retail sales of small cars, such as the Honda Fit and Toyota Yaris, and subcompacts, such as Toyota's Corolla and Ford's Focus, continued to climb. Those cars accounted for 22.1% of sales last month, vs. 19.5% in February.

"When gas prices came down last fall, a lot of so-called pundits on cable TV said consumers were returning to gas guzzlers, but that's just not the case," says Ford senior sales analyst George Pipas. "People who think that is happening are only looking at the total SUV sales number, but that growth is coming from car-based crossover SUVs, which may as well be counted as cars and not trucks."

Indeed, maybe last year's spike in gas prices above $4 a gallon nationally has a more lasting impact than many believed. Large SUVs, notes Ford, were just 1.7% of sales last month for the industry, vs. 2.4% last year. Five years ago, vehicles such as the Ford Expedition and Chevy Tahoe accounted for 5% to 7% of annual sales. Even with gas around $3 a gallon, the falloff in total sales and popularity of such SUVs looks long-lasting to Pipas.

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