U.S. Auto Sales Slip in First Half of 2019 as Prices Surge

By Nora Naughton 

Major auto makers saw U.S. new-vehicle sales slip in the first half of 2019, as higher interest rates and rising car prices dulled demand and sent many buyers to the used-car lot.

General Motors Co.'s sales fell 4.2% through June, hurt by weaker sedan sales and tighter inventories of heavy-duty trucks due to a planned factory retooling for newer versions.

Fiat Chrysler Automobiles N.V. saw sales slip 2% in the first half of the year, dragged down by declines for five of its six brands, including an 8% drop in sales for its top-selling Jeep brand. Its profit-rich Ram pickup truck division was the only brand in the U.S. to post an increase, with sales surging 28% from a year earlier.

Toyota Motor Corp.'s U.S. sales fell 3% in the first six months. Strong sales of its top-selling Rav4 compact SUV were offset by weakening sales of its staple Corolla and Camry sedans.

Ford Motor Co. is the only major auto maker that will report quarterly sales on Wednesday.

U.S. new-vehicle sales this year are likely to fall short of the 17 million mark for the first time since 2014. A protracted run of strong sales following the financial crisis has satiated pent-up demand, and the sharp increase in prices is making it tougher for buyers to afford new wheels, analysts say,

The average new vehicle sold for about $33,350 in the first six months of the year, a record for the period and up nearly 4% from a year ago, according to an estimate from research firm J.D. Power. Prices are rising partly because U.S. buyers continue to gravitate to larger vehicles like sport-utility vehicles and pickup trucks with higher price tags.

The pace of sales remains historically strong, and analysts say solid economic indicators and an expected influx of fresh models into U.S. showrooms in coming years should keep sales from dropping too steeply.

GM Chief Economist Elaine Buckberg said expected interest rate cuts should help new-vehicle demand in the second half of the year. The Detroit auto maker commanded higher prices for its models in the second quarter, with pricing up 4% to $37,126 per vehicle, the company said.

"Auto demand was better than anticipated in the first half and we expect strong performance in the second half of the year," Ms. Buckberg said in a statement.

Interest rates started to come down this spring after swelling earlier in the year, with June's average hitting 6%, the lowest so far this year, according to Edmunds.

"High-interest rates have been the biggest story so far this year, and for good reason," said Edmunds analyst Jessica Caldwell. "The trickle-down effect has been significant for all areas of the auto market."

The slowdown in the U.S. market comes as markets in Europe and China also are cooling. In a research note last week, Morgan Stanley forecast global auto production to fall 4% this year, which will pressure profits for suppliers and car companies.

Shoppers turned off by high sticker prices are finding attractive used-car deals, as a surge of newer SUVs coming off lease wind up on used-vehicle lots. Used-car sales grew by around 9% in the first half of the year, according to an estimate from J.D. Power.

--Aisha Al-Muslim contributed to this article.

(END) Dow Jones Newswires

July 02, 2019 12:29 ET (16:29 GMT)

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