U.S. Markets close in 3 hrs 46 mins

US September Auto Sales Fall: Fewer Selling Days to be Blamed?

Zacks Equity Research

Following a rough first half of the year, U.S. light-vehicle sales increased for the second straight month in August, aided by five sales weekends due to the Labor Day holiday. However, with sales on the Labor Day weekend being counted as part of August’s tally, U.S. car sales in September took a hit.

While monthly U.S. car sales in 2019 declined each month through January to June, the drop had been relatively small. However, as September 2019 had fewer selling days than a year ago due to the Labor Day weekend, major automakers registered double-digit percentage sales decline.

U.S. auto sales in September took a big step back after recording impressive numbers in July and August. Light vehicle sales totaled 1,268,871 in the last month, reflecting a 12% year-over-year decline.

Markedly, Hyundai’s U.S September sales fell 9% to 51,951 units, ending its 13-month streak of year-over-year monthly gains. The decline was due to lower volumes of Elantra and Sonata sedans. Subaru Corporation's U.S. sales fell 9.4% from the comparable year-ago period to 51,659 units, snapping a streak of 93 consecutive monthly gains. Rapid sell-down of older-generation Legacy sedans and Outback crossovers ended the company’s winning streak after almost eight years.

Leading Japan-based automakers like Honda Motor HMC, Toyota Motor TM and Nissan Motor NSANY recorded double-digit percentage declines in U.S. car sales from the year-ago  period. U.S. auto giants namely General Motors GM, Ford F and Fiat Chrysler FCAU also suffered from sales decline in September.

Let’s delve deeper.

The Big 3 Japan-Based Automakers’ September U.S. Sales Stumble

Toyota’s U.S. sales declined 16.5% year over year to 169,656 units in September, with deliveries falling for almost every model including Corolla, Camry, Pirus, RAV4, Land Crusier, and Highlander, among others. Sales for both its namesake and Lexus brands tumbled in double digits percentages from the prior-year period to come in at 150,796 and 18,860 units, respectively. Reportedly, this marks the firm’s biggest decline in U.S. car sales volumes in eight years.

Honda sales slid 14% from the corresponding period of 2018 to 113,925 units in September, after setting an all-time U.S. sales record in August. The decline marked the biggest fall since December 2011.Notably, the company’s sales of cars and trucks declined 14.5% and 13.8%, respectively, from the year-ago period. While sales in the Honda division were down 13.7% to 102,827 units, Acura sales dipped 17.9% from the prior-year period to 11,098 units. Major models that saw a year-over-year decline in the month include Accord, Pilot and Civic.

Nissan’s deliveries decreased 17.6% in the month to 101,244 units amid lower sales of Sentra sedans and Rougue SUVs. Sales for the Infinity luxury division plummeted 44% from the year-ago period.

The Big 3 U.S. Automakers Unveil Quarterly Sales

General Motors, Ford and Fiat Chrysler now report quarterly sales figures instead of reporting on a monthly basis. However, according to Automotive News Data Centre estimates, U.S. auto sales for these firms also witnessed double digit percentage drop in September.

Let’s take a closer look at the quarterly U.S. car sales for the Big 3 automakers of the nation. Notably, the three auto giants are removing sedans and compact cars from their lineups to focus more on larger vehicles with higher profit margins.

General Motors’ sales for the period of July to September increased 6.3% from the prior-year period to 738,638 deliveries. The company reported increased sales across all leading brands including Chevrolet, Buick, GMC and Cadillac. While sales from Chevy rose 4.6% to 507,273 units, GMC registered 11.4% year-over-year growth to 140,789 vehicles. Buick and Cadillac scaled up 10.2% and 7.2% year over year to 50,615 and 36,961 deliveries, respectively. The company ended the quarter with 759,633 units of inventory, which will be monitored closely as the strike with UAW has completed its 17th day. General Motors currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ford’s total vehicle sales in the United States declined 4.9% year over year to come in at 580,251 in third-quarter 2019, as the firm trimmed sedans from the Ford brand. The decline primarily resulted from lower sales of cars and SUVs, partially offset by higher truck sales. The firm’s truck sales rose 8.8% in the quarter, thanks to Ranger pickups. Third-quarter pickup sales of 240,387 marked the company’s best performance in 14 years. While SUVs and car sales declined 10.5% and 29.5%, respectively, Ford van sales hit an all-time record in the quarter, up 21% from 65,288 units a year ago. Ford Transit and Transit Connect were responsible for the record van sales. Notably, Lincoln SUVs reported best third-quarter sales performance in 16 years.

Fiat Chrysler’s overall sales in the quarter ended September totaled 565,034 units, almost flat with the year-ago quarter. Robust RAM truck sales made up for the decline of sales at its other brands including Chrysler, Dodge, Fiat, Jeep and Alfa Romeo. RAM sales recorded year-over-year gain of 15% to record deliveries of 179,200, backed by new 2500 and 3500 heavy-duty pickups. Notably, Jeep Wrangler and Dodge Challenger registered record third-quarter sales of 59,035 and 18,031 units, respectively.

Final Thoughts

With the auto sector being consumer cyclical in nature, low unemployment rates and robust wage growth are tailwinds for the industry. Further, Fed rate cuts have allowed more money to be injected into the economy, inducing businesses to invest and consumers to spend and borrow. Interest rates on auto loans are likely to reduce further, which bodes well for the industry. However, escalating tensions with Iran and rising U.S.-Sino trade tiff may put a brake on economic expansion in the near future. The UAW strike at General Motors is also causing uncertainty. Further, rising car prices on the back of technological advancements may affect consumer demand. However, according to sources, U.S. car sales for October are likely to rebound and stay strong in the remainder of 2019.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Ford Motor Company (F) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
 
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
 
Nissan Motor Co. (NSANY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research