Strong August auto sales numbers revealed a problem last month that Ford, General Motors and Chrysler once would have begged for — not enough cars to sell.
All three automakers posted double-digit gains in sales last month and they reported tight inventories on some models.
For Ford Motor Co. it’s the Fusion sedan and Explorer and Escape crossovers; they just can’t build them fast enough. In Los Angeles, San Francisco and Miami, a Fusion is lasting just 13 days at a dealership before being sold. Typically cars can sit on a lot for two months.
Chevrolet has only a 35-day supply of its Cruze and can sell every unit of its newly redesigned Impala that it makes. Chrysler needs more Jeeps and Fiat 500Ls.
It’s quite a turnabout for the domestic brands, which just five years ago had to offer huge discounts and incentives to move vehicles out of showrooms.
“Keeping things on the lean side is a much better place to be,” said Jeff Schuster, an analyst at LMC Automotive.
They might miss out on some sales, but that sure beats offering the friends-and-family discount to everyone with a driver’s license.
It’s a conundrum for the automakers.
“You don’t want to go back to the bad old days when you had too many cars to sell, but you also want to have enough inventory so that customers can find the vehicles with the options they want,” said Elaine Kwei, an analyst at the Jefferies investment firm.
“It’s hard to imagine that the Detroit guys find themselves in this position,” she said.
Ford plans to increase production by about 50,000 vehicles during the fourth quarter, a 7 percent increase from the same period a year earlier. It also hired 1,400 new workers at its Flat Rock, Mich., assembly plant to build more Fusions.
Tighter supplies are translating into higher prices and greater profits, said Jesse Toprak, an analyst with auto price company TrueCar.com.
The average transaction price for Ford vehicles last month rose 6.9 percent to $33,460, its highest ever, Toprak said. GM saw its average transaction price rise 4.3 percent to $33,492 in August.
TrueCar.com estimated that U.S. auto sales reached about 1.5 million vehicles last month, up about 14 percent from the same month a year earlier.
“Based on everything we see, the economy is on solid footing, which means the industry should remain strong,” said Kurt McNeil, vice president of GM’s U.S. sales operations.
GM said it sold 275,847 vehicles in the U.S. last month, up 14.7 percent compared with the same month a year earlier.
Ford said it sold 221,270 vehicles in August, a 12.2 percent increase from the previous year.
Chrysler Group said it sold 165,552 vehicles in the U.S. last month, a 12 percent gain from the same month a year earlier.
Toyota Motor Corp. said it sold 231,537 vehicles in the U.S. last month, a 22.8 percent increase from August a year ago.
Nissan Motor Co. said its U.S. sales hit 120,498 vehicles last month, a 22.3 percent gain and an August record for the Japanese automaker.
Market research firm J.D. Power and Associates said that consumer spending on new vehicles in August will approach $36 billion, which is the highest level on record.
Still, the industry should temper its excitement, said Jack R. Nerad, an analyst at auto information company Kelley Blue Book.
Aging cars that need replacing and low interest rates have enabled the the auto industry to beat overall economic growth, Nerad said.
“But that doesn’t mean that sales will continue at the strong pace we’ve seen in August,” he said. “The overall economic recovery is weak and fragile, so another shock could send sales back.”
Source: MCT Information Services