Slacking Demand for Traditional Cars Hurts Auto Makers

By Adrienne Roberts and Mike Colias 

Detroit auto makers on Tuesday reported mixed U.S. auto sales for April as demand for conventional passenger cars, such as sedans, continues to wither.

After an unexpectedly strong March, vehicle sales are expected to show a drop in April when more auto makers report later Tuesday, partly because of two fewer selling days than last year. But analysts say April results also will reflect a number of factors keeping sales from their highs of recent years, including higher monthly payments and a proliferation of late-model used cars for buyers to choose from.

Ford Motor Co. reported a 4.5% decrease, selling 203,856 vehicles during the month. The company's passenger-cars sales fell 15% for the month, while truck sales remained strong.

Fiat Chrysler Automobiles NV reported a sales increase, due to strong sales of the company's Jeep brand vehicles. It said sales were up 5% in April, rising to 184,149.

General Motors Co. won't report April sales. It reported its last monthly sales figures for March, and will disclose sales on a quarterly basis moving forward.

Demand for pickup trucks and SUVs has fueled the boom in overall U.S. auto sales in recent years. But dealers and car executives point to signs of stiffening competition in those categories, which could sap profits.

Auto makers spent about $3,700 per vehicle in discounts and other incentives in April, about 5% higher than a year earlier, according to research firm LMC Automotive. But the deals were heavily tilted toward crossovers and SUVs, while incentives on car models declined.

It is a sign the price pressure that has hurt profitability in car categories in recent years could be spreading to more-lucrative segments like crossover SUVs.

Fuel prices also are creeping higher. Average regular retail gas prices reached $2.80 last week, according to the U.S. Energy Information Administration, the highest since 2015. Prices are expected to rise and could top $3.00 through the summer driving season.

Climbing gas prices comes at a time when the majority of Americans prefer gas-guzzling sport-utility vehicles and pickup trucks. Higher gas prices combined with rising interest rates could make it harder for dealers to arrange monthly payments that buyers can afford.

Mike Jackson, CEO of AutoNation Inc., the biggest dealership chain, on Tuesday said despite rising gas prices, he doesn't see consumer behavior changing. He said the fuel economy of SUVs "has improved dramatically" and he doesn't see consumer preference switching back to sedans unless gas prices hit $5.00 a gallon.

Write to Adrienne Roberts at [e-mail] and Mike Colias at [e-mail]

(END) Dow Jones Newswires

May 01, 2018 10:23 ET (14:23 GMT)

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