We won't know for sure until June's official results are released next week, but early signs suggest that U.S. auto sales have slowed a bit from the hot pace seen earlier in 2012.
They're still pretty hot, though: While total sales are expected to be down substantially from last month, analysts at TrueCar.com are predicting that this will be the best June for new-car sales since 2007.
While the big story will be the resurgence of Toyota
At first glance, a strong month -- but look deeper
TrueCar.com expects overall U.S. auto sales to be up about 18% year over year -- but that's a figure that should come with some caveats. At this time last year, Toyota and Honda were facing severe shortages of new cars thanks to production disruptions in the wake of the March tsunami that devastated northern Japan. That led to big surges in sales for the likes of Ford and General Motors
Long story short, high prices and short supplies made last year's numbers lower than they might have been, making year-to-year comparisons look quite rosy. A fairer comparison might be to last month's numbers -- and there, TrueCar's projections suggest an almost 7% decline.
TrueCar expects all of the major players to show declines from May's totals. As I mentioned, Toyota and Honda will probably post huge (50%-plus) year-over-year sales gains, with Toyota's U.S. market share surging to a close third place behind GM and Ford. TrueCar also predicts a big gain for VW, in the 25% range, as the German company continues its aggressive push to expand its presence in non-European markets.
All those gains are coming from somewhere, of course, and TrueCar's estimates suggest that quite a few of them are coming from Ford. But that might not be all bad news for Ford shareholders.
Why slipping sales might not be bad for Ford
For years, Detroit CEOs obsessed over tiny shifts in U.S. market share. But current Ford CEO Alan Mulally doesn't play that game: He's -- properly -- much more concerned about the company's margins and overall profits than he is about a few points in share gained or lost versus GM or Toyota. Having somewhat fewer sales but bigger profits is a tradeoff he's willing to make.
Think about that while you ponder some grim-sounding forecasts: TrueCar sees Ford's June sales coming in essentially flat versus last year's -- which implies a drop in the Blue Oval's U.S. market share from 18.4% a year ago to 15.6% in June if these projections hold. Worse, TrueCar sees Ford's market share falling notably from last month's 16.2%. What's going on?
Probably a few things. Ford has said that production of its most popular vehicles is maxed out -- while the company plans to boost production of hot models like the Focus and Explorer, those increases won't show up at dealers until later this year. That has made for short supplies at some dealers and might be leading some consumers to choose other vehicles over waiting.
But here's the part that should reassure shareholders, at least somewhat: Ford's spending on incentives -- those "cash-back" or "zero-percent financing" deals one sees advertised -- has fallen sharply. The Detroit automakers have long had the highest incentives, but Ford's have fallen sharply in recent months -- to $2,489 per vehicle in June, TrueCar estimates, right around the industry average.
For comparison, GM and Chrysler are both spending more than $3,000 per vehicle, TrueCar estimates, while Nissan's (OTC: NSANY) spending may have surpassed Ford's, and VW and Honda are close behind. That's a sea change for Ford, and while it probably reflects Ford's own supply limitations in part, it's also an outgrowth of the desirability of the Blue Oval's current product line.
The upshot: It's not time to worry about Ford yet
Even if Ford's market share is falling a bit, the extra $500-plus it's pocketing on every sale is likely to keep the company's second-quarter profits strong. U.S. auto sales are Ford's "engine," to use Mulally's term -- while Ford sells vehicles all over the world, much of the company's revenues (and profits) are generated right here at home.
While nobody likes to see sales slip while competitors make gains, the real results that matter are Ford's second-quarter earnings, which will be out next month. That'll tell us whether Ford needs to step up its sales pace -- or whether Mulally's grand vision is bearing fruit.
It's worth remembering that Ford has been performing incredibly well over the past few years -- it's making good vehicles, is consistently profitable, has recently reinstated its dividend, and has done a remarkable job paying down its debt.
But even so, Ford's stock price is down 19% over the past year. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Get instant access to this premium report. Or if you'd rather take a look at a high-growth company outside the cyclical manufacturing sector, check out our special free report, "The Motley Fool's Top Stock for 2012," which features a company our chief investment officer uncovered that's revolutionizing commerce in Latin America.