Detroit Auto Wrap-Up: Even SUV Sales Begin to Slow

Detroit skyline. Image source: Getty Images.

As the automotive industry neared sales day, many investors were pessimistic. Their concerns played out as they saw that industry sales had remained nearly flat and below estimates. Worse yet, at least for Detroit automakers, sales of SUVs finally showed a chip in their recently impenetrable armor.

"It's clear the industry is plateauing, as we're now seeing signs of SUVs slowing down for several brands, while sedans continue to struggle," said Akshay Anand, an analyst for Kelley Blue Book, according to Automotive News. "With incentives continuing to rise faster than average transaction prices, combined with slowing growth, the industry is in a tricky spot."

Let's dig into the highlights and takeaways from General Motors (GM 1.20%), Ford Motor Company (F 0.69%), and Fiat Chrysler Automobiles (FCAU).

General Motors: Total sales down 1.9% in July to 267,258 units

While GM's total sales continued to shrink, a lot of that had to do with the company's stringent focus on shedding less-profitable daily rental fleet sales, which were down more than 10,000 units last month, or 42%, compared with the prior year. In total, consider that fleet sales generated only 11.6% of GM's July sales, which is far below its goal of about 20%. 

On the flip side, GM's retail momentum continues to do well. GM's retail sales were up 5% in July, to 236,235 units, driven by retail sales gains across the board for each of GM's four brands: Chevrolet, GMC, Buick, and Cadillac. Across-the-board gains helped push GM's retail market share up 1 percentage point during July to 17.9%, which was the highest GM monthly retail share since December 2011. In fact, GM has increased its retail market share in 14 of the past 15 months.

Chevrolet Equinox. Image source: General Motors.

Bucking some of its competitors' SUV sales slowdown, Chevrolet's larger, and more profitable, vehicles posted a strong month,with the Equinox, Suburban, Tahoe, Traverse, and Trax posting retail sales gains of 8%, 12%, 12%, 24%, and 63%, respectively. Chevrolet continues to be the fastest-growing full-line brand in the industry and continues to generate roughly two-thirds of GM's total U.S. sales.

Looking at details important to GM's maintaining strong margins, there were mixed results in July. On one hand, GM's average transaction prices, which are calculated as retail transaction prices after incentive spending, remained a robust $34,887. That's more than $4,100 above the industry average and more than $1,100 above GM's level from a year ago.

On the other hand, GM's incentive spending spiked to 14.2% through July 24, thanks to an eight-day sale during the early part of July. That 14.2% was a fairly significant increase from its year-long average of 11.4%.

Ford Motor Company: Total sales down 2.8% in July to 216,479 units

While Ford's sales decline was a touch more than analysts expected, it was a bit more disappointing when you consider the mix of retail and fleet sales. Ford's fleet sales were up 6% while its more valuable retail sales were down 6%, culminating in the total 2.8% decline.

The most glaring hole in Ford's figures wasn't much of a surprise, as its car segment posted a nearly 10% decline compared with the prior year, led lower by a 17.9% drop in the Focus. Even Ford's SUV segment posted a rare 5.3% decline, which is a reversal from a segment that remains up 6.4% for the year. Ford investors can hope that this is a one-month anomaly, because SUV weakness would hinder the company's ability to bounce back and have a better-than-expected third quarter.

Lincoln took a step back in July, but the MKX has had a great year. Image source: Ford Motor Company.

Ford's luxury lineup faced a similar story. Lincoln, which has been having a strong year, posted a rare 2016 decline, with 4.6% fewer vehicles sold last month. However, Lincoln's year-to-date sales remain 10.1% higher compared with the same time period last year.

The bright spot was easy to find: Ford's trucks and vans segment. That segment posted a 4.8% gain during July, led by the Transit's 41.2% jump in sales. While van sales remain largely overlooked by investors, it's a very valuable business for Ford. The automaker's van sales reached their best July result since 1978, with more than 20,200 units sold.

Thanks to continued strength in the trucks and vans segment, as well as strong pricing with its SUV segment, Ford's average transaction prices moved $1,600 higher last month compared with the prior year. That increase was more than double the industry average, according to Ford.

Fiat Chrysler Automobiles: Total sales up 0.3% in July to 180,727 units

Dust continues to settle around the matter of FCA's incorrect sales data reporting, which nullified the automaker's long-standing streak of monthly sales gains, but FCA did manage to post a meager gain for July. However, FCA shared a problem with Ford in that its retail sales declined 2% last month while its fleet sales moved higher -- though in FCA's case, by a much larger 22% year over year.

Over the past couple of years, Jeep has been on a tear, with its monthly sales often easily logging large double-digit gains. As those comparisons continue to get tougher, we're finally seeing those monthly gains come back down to earth, although Jeep still posted a fair 5% gain in July. For context, Jeep sales remain 14% higher for the year through July, compared with 2015 -- and as Jeep is one of the strongest SUV brands, if not the strongest of all, that definitely highlight's the segment's weakness during July. 

As usual, Ram was the next bright spot in FCA's sales data. Ram truck sales, which includes not only the Ram pickup but also the Ram ProMaster and Ram ProMaster City, were up 5% in July. Similar to Jeep, though, July brought a slowdown in sales gains, as the brand has increased sales by 10% year to date.

Ultimately, it was a pretty unremarkable month for the auto industry, as the long-awaited peak of the sales cycle may have officially arrived. The question going forward will be how the automakers handle their incentives and match supply with demand. Sales should continue to remain near record highs, which is a great thing, but for the time being, investors should pay considerable attention to average transaction prices and incentive spending rather than monthly gains or losses -- as the former will be increasingly important for beating quarterly and annual guidance.