U.S. July auto sales drop, Toyota surges
DETROIT, Aug 1 (Reuters) - U.S. auto sales slid 17 percent in July as Americans shunned trucks and opted for more fuel-efficient cars, catapulting Japan's Toyota Motor Corp. (7203.T: Quote, NEWS, Research) past Ford Motor Co. (F.N: Quote, Profile, Research) into the No. 2 spot for the first time.
Detroit-based automakers suffered double-digit declines in sales from the peak of last summer's incentive-driven boom, with DaimlerChrysler AG's Chrysler Group and Ford hardest-hit in a market hurt by high interest rates and gas prices.
Chrysler Group lost 37 percent and Ford 34 percent, but Toyota jumped an industry-leading 16 percent, driven by a 25 percent surge for passenger cars such as the Corolla.
Sales for Japan's Honda Motor Co. (7267.T: Quote, NEWS, Research) gained 10 percent and South Korea's Hyundai Motor Co. (005380.KS: Quote, Profile, Research) added 6 percent, putting all three Asian automakers on track for a larger share of a softening U.S. market for new vehicles.
General Motors Corp. (GM.N: Quote, Profile, Research), the No. 1 automaker worldwide, posted a 19.5 percent drop in U.S. sales, in line with expectations, given the tough year-earlier comparison.
Autodata Corp. reported that overall sales of U.S. light vehicles came in at a seasonally adjusted, annualized rate of 17.24 million units in July, down from a near-record high of 20.72 million a year earlier when the traditional Big Three offered employee discounts to all buyers.
Chrysler Group, which has been working to sell off inventory ahead of the launch of key new models, was the only automaker to bring back employee pricing this July, a sequel that fizzled with U.S. consumers.
DaimlerChrysler's sales dropped 34 percent in July, a steeper-than-expected drop that analysts said underscored Chrysler's reliance on rolling out new hit products rather than competing on price.
Chrysler responded to its weak July sales numbers by extending its package of discounts, including employee-level pricing and zero-percent financing, until the end of August.
"Consumers are wrestling with higher interest rates and other increased household costs on a monthly basis," said Michael Manley, vice president for sales strategy at Chrysler.
Ford's sales were weighed down by a 44 percent slide in its profitable truck line-up, an area of the market the automaker has long dominated.
"Ford and Chrysler were just simply disappointing," said Jesse Toprak, an analyst at Edmunds.com who had forecast higher sales. "It's a quite dramatic decline."
Said George Magliano, analyst at Global Insight: "I think for Chrysler it's very short-term and shows how product sensitive they are. I'm more worried about Ford. Ford is more structural, I think."
GM, which touched last summer's price-war, has steered clear of a repeat of the same kind of sweeping rebates this year.
"I would view our results as very solid," said GM sales analyst Paul Ballew. "In fact, better than what we expected at the beginning of the month, and better than we thought even at midmonth."
Last year's summer price war boosted the number of cars sold but sacrificed profitability for both the U.S. automakers and their dealers. The incentives also made monthly shifts in auto sales highly volatile.
"What we aren't going to have in (2006) was this roller-coaster that we were on in (2005)," said Ford sales analyst George Pipas. "We're aren't going to see the peaks and hopefully we won't see the valley."
Reflecting their fall from favor with consumers, large trucks and SUVs carried higher-than-average discounts of more than $5,200 on average in July, according to Edmunds.com.
Despite the drop in July sales, GM, Ford and Chrysler all reported progress in reducing vehicle inventories, in part because of production cutbacks.
GM had 930,000 vehicles at the end of July, down 21 percent from the previous month, while Ford reduced its inventory by nearly 15 percent to 677,000 vehicles. Chrysler's inventory declined 14 percent to 560,210 vehicles.
The defection from SUVs also hurt some luxury car makers in July. Porsche AG (PSHG_p.DE: Quote, Profile, Research) suffered a 23 percent drop in demand for its Cayenne model, even as its overall sales rose 12 percent on the back of strong demand for the Cayman coupe.
By contrast, new compact and sub-compact models have proved popular. Nissan Motor Co. (7201.T: Quote, NEWS, Research) said it sold 2,856 of the new Versa compacts in July, double the company's internal forecast.
Nissan, which is considering a tie-up that would extend its current alliance with Renault SA (RENA.PA: Quote, Profile, Research) to include GM, posted a drop in overall sales of 16 percent, outperforming the market by a slight margin.
"Sedans are selling well, and trucks have not done well. A lot of the fuel price is showing its effect," said Brad Bradshaw, Nissan vice president and general manager. (Additional reporting by Poornima Gupta and Jui Chakravorty)
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