Not all is Good in The US Auto Industry

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Inspite of witnessing another month of strong demand from U.S. consumers where they bought just over 1.5 million vehicles, nudging out the old record set in April of 2005, things don’t look particularly good in the worlds’s 2nd largest auto-market. The sales were largely driven by a rise in demands of trucks and SUV’s at the expense of the traditional cars. An economy which is still in turmoil and the potential of any further growth of the industry already peaking the future looks gloom and the fall in share prices of the automakers even after high sales speaks of the uncertainty.

Ahead of the final tally for U.S. light vehicle sales in April, General Motors estimated the seasonally adjusted annualized selling rate will be 17.6 million vehicles. That was more than the 17.5 million vehicles expected by analysts polled by Reuters. U.S. auto sales in 2015 hit a record 17.4 million vehicles.

Wall Street analysts say the U.S. auto market is close to a cyclical peak and that more production cuts, which hurt profits, could be needed to keep inventories of vehicles from ballooning later in the year.

“We continue to believe sales growth will be muted this year,” Joseph Spak of RBC Capital said in a note to investors.

Inventory data issued Tuesday pointed to some possible “risk to North American production over the coming months,” Spak added.

The sluggish pace of U.S. economic growth adds to concerns that the auto industry recovery could run out of fuel.

GM and Ford shares were down more than 1 percent, generally in line with the broader market, while Fiat Chrysler Automobiles fell more than 2 percent.

GM and Ford said sales to individual consumers were still growing. But because GM has been cutting back on low-profit sales to rental car companies and other fleets, its overall April U.S. sales fell by 3.5 percent.

GM’s results were among many that highlighted a divide in the market between slumping sales of traditional sedans, and robust demand for pickup trucks and SUVs.

GM said sales of the Chevrolet Silverado pickup truck rose nearly 9 percent in April compared to a year earlier. However, sales of GM’s Cadillac CTS and ATS luxury sedans plummeted 23 percent and 18 percent, respectively.

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Other luxury brands also had weak results in April, especially for cars. Toyota’s Lexus luxury division suffered a 26 percent decline in sales of cars such as the large LS sedan, although sales of Lexus brand SUVs rose 20 percent.

German luxury car maker BMW said sales of its BMW brand passenger cars fell 6.5 percent, while its SUV sales fell 9.7 percent.

The chief executives of two leading auto dealer groups, AutoNation and Group 1 Automotive, had warned in April that automakers should start curbing production, particularly of slow-selling luxury sedans.

Still, April U.S. sales for Ford, Honda and Nissan all beat analysts’ expectations. Ford’s sales rose 4 percent from a year earlier, Fiat Chrysler Automobiles was up 5.6 percent and Toyota, No. 3 in the U.S. market, rose 3.8 percent. Honda’s sales rose 14.4 percent.

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