Things had been on a positive trajectory for all of 2011 (and even into last year), but the auto industry hit an air pocket in May. After seven months of year-over-year increases, total industry volume fell by 4% compared to last May. The overall market slowed to an 11.8-million-unit annual pace, which is the first sub-12-million number we’ve seen since August.
Japanese automakers can blame some of the drop on supply shortages due to the disaster in Japan. And some of them exacerbated the situation by cutting back dramatically on marketing and incentives in order to preserve inventory, a strategy that worked too well, and kept shoppers away. Taking a cue from Toyota and Honda, other automakers followed suit, which resulted in May’s overall incentive spending being the lowest in years. All three domestic automakers spent less compared to last year but the domestics still spend more than the industry average -- particularly GM and Chrysler. By the end of the month, incentives were trending up again but the damage was done.
Additionally, gas prices vaulted over $4 a gallon, which finally put the brakes on sales of big pickups and SUVs, hurting GM and Ford (but, strangely, not Chrysler). Finally, the overall economy sputtered, as job creation stalled and growth slowed dramatically, adding to consumer jitters.
May’s results were wildly out of whack (Chrysler outsold both Honda and Toyota; none of the usual sedan subjects -- Camry, Accord, Corolla, and Civic -- made the Top 10 bestseller list). This is too weird to last. The Japanese supply situation will work itself out (with improvement expected as soon as June), and incentive spending will normalize. But the overall economy may continue to struggle and gas prices, although now mitigating, remain a wild card. The climb up to this year’s hoped-for 13-million-unit sales level could easily hit some more unforeseen turbulence.
SALES RESULTS FOR APRIL 2011, AND PERCENT CHANGE VERSUS APRIL 2010
GENERAL MOTORS +0%
Rising gas prices were clearly evident in GM’s May results, which saw trucks decline and cars advance. (The small overall decline that’s been reported elsewhere reflects the loss of sales from GM’s dropped nameplates.) The company claimed that retail sales actually rose, but fleet sales still comprised nearly 1/3 of GM’s total.
The Silverado dropped by 16% (paralleling the decline for Ford’s F-series), and the Traverse (-38%) and Tahoe (-37%) fell back as well, reflecting weakness in the truck market. Only the compact Equinox (+34%) looked really good. Things were much better on the car side, where the Cruze is running about 50% ahead of the Cobalt (and far better than that if you count only retail sales). The Malibu emerged as the bestselling passenger car -- although the Malibu’s increase (+18%) doesn’t look quite as good (+3%) if you subtract fleet sales. Overall, though, Chevy’s retail sales in May were higher than the year prior.
Buick has grown its sales by adding the Regal to its lineup. All existing Buick models declined in May. The Regal has just about caught up with the Enclave and looks like it could then overtake the LaCrosse to become Buick’s bestselling car.
Cadillac was down overall, but as at Chevrolet, retail sales did increase. The CTS (+23%) did well but the SRX (-4%) took a breather. Given the weakness in large trucks/SUVs, it’s not surprising that the Escalades declined.
Although the Sierra pickup (-5%) couldn’t defy the big-pickup downtrend, GMC managed to stay in the black thanks to the Terrain (+42%) and the Acadia (+19%), with an assist on the commercial side from its big vans (+89%).