Sales numbers are in and June turned out to be a great month for automakers, with U.S. auto sales growing at a faster pace than any time in the last eight years. June sales grew 1.2% to 1.4 million in the U.S. compared with last June.
These sales were not uniform across the industry, however, and major shifts came to light in the report. Within the Big Three automakers of Japan, Nissan's U.S. sales (NASDAQOTH: NSANY) climbed 5% in June compared with the same month last year, while Toyota's (NYSE: TM) gained 3%, and Honda's (NYSE: HMC) plunged 6%.
Toyota leads in luxury
Each of these companies boasts a reputable luxury division, appealing to a broader range of consumers: Nissan has Infiniti, Honda has Acura, and Toyota has Lexus. Due to differences in price positioning and sophistication of vehicles produced, Lexus is considered by many to be a true luxury brand, while Infiniti and Acura are "near-luxury." These vehicles are positioned to appeal to those who want something in between a normal nameplate and a luxury vehicle.
For the first half of 2014, U.S. Acura sales made up 11% of Honda's total U.S. sales of 739,436. For Nissan, the first half of 2014 saw total U.S. sales of 704,477, with 8% of these coming from the Infiniti division. Lexus sales for the first half of the year made up 12% of the total 1,165,607 sales made by Toyota Motor Co. in the U.S.
Of the three Japanese automakers, Toyota was the only one to see U.S. luxury sales increase in June, gaining 10% over the previous June Lexus sales. Infiniti saw its U.S. sales in June drop 6% compared to sales last June, while for Acura the results were much worse, with a plunge of 19% for its U.S. year-over-year June sales.
The sales drop may not be a big deal
This sales slump may only be a short-term problem for Infiniti and Acura. Many experts agree that nothing appears to be truly wrong with Acura, which has a great reputation for making high quality cars. Instead, the general outlook on Acura at the moment is that the brand seems to be in between new product offerings, and sales are suffering now as consumers wait for new models such as all-new 2015 TLX lineup.
Despite its U.S. sales drop in year-over-year June sales, Infiniti has seen a record 101,220 cars sold worldwide in first half of 2014. This is an incredible 30% increase from a year earlier.
A bumpy road ahead for Acura and Infiniti
On the other hand, this loss of sales could become a trend for Acura and Infiniti. Three German luxury car brands -- Audi, BMW, and Mercedes -- have each come out with a new model aimed at the near-luxury segment. BMW has its 2-Series and Mercedes recently introduced the CLA, which along with the Audi A3 sells for less than $30,000.
Each of these down market offerings is siphoning sales from the near-luxury Acura and Infiniti. Just months after coming to the market, the CLA started outselling Acura's top car, the TL. In June, the Audi A3 made up 15% of the company's U.S. sales.
Why Infiniti may be in further trouble
While the worldwide sales increase for Infiniti in the first half of 2014 is impressive, when brought into the context of the company's overall position the cracks in the facade appear.
Infiniti has set for itself the lofty goal of selling 500,000 vehicles in a fiscal year by 2020. Using the recent record sales of 101,220 vehicles worldwide in the first half of this year as a base for projecting future sales, Infiniti would require a compound annual growth rate of over 16% to achieve the sales goal. This sales target seems to be out of touch with reality. Furthermore, the drop in U.S June year-over-year sales displays weakness. Infiniti is far behind Lexus and the German luxury brands with regards to consumer perception.
Infiniti acknowledged the need for a turnaround. In 2012 the company hired Johan de Nysschen, former U.S. chief for Audi, where he had turned that company around. During his time with Infiniti, De Nysschen was quoted by Forbes admitting, "We need to address the many shortcomings in our product range." He went on to say, "Our aspiration is to set up Infiniti as a highly respected, highly regarded premium luxury brand."
Recognizing the need to reposition the company as a luxury brand instead of the near-luxury perception it has earned, Infiniti has made some changes to its product lineup and has introduced the Q50 Eau Rouge concept as a halo car for the brand. Unfortunately, de Nysschen has decided to leave Infiniti to run General Motors' Cadillac brand.
Stuck in-between upmarket luxury brands and more common nameplates, the future of Acura and Infiniti hangs in the balance. If Infiniti is to meet its extremely impressive sales goal, then the company could see some major changes. In Acura's case, future growth depends largely on whether the new TLX lineup is a homerun with consumers.
Evan Avery has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.