The good news for Toyota: RAV4 sales were strong in January. The bad news: Sales of some other Toyotas were dismal. Image source: Toyota.

Toyota (NYSE:TM) said its U.S. sales fell 4.7% in January, as good results for some of its crossover SUVs failed to offset a big drop in sales of car models.

A decent month for Toyota's trucks, but a very tough one for its cars
As a group, Toyota's light-truck models had a pretty good month in January. Sales of the compact RAV4 crossover rose 8.7%, the 4Runner gained 7.9%, and the midsize Tacoma pickup posted a 11.5% gain. Add in the Sienna minivans's 23% year-over-year increase and good results for Lexus luxury models, and Toyota's overall truck lineup managed a respectable 4.4% gain for the month.

But it was a different story when it came to cars. Sales of the small Yaris (down 62%), compact Corolla (down 18%), and full-size Avalon (down 25%) were all dismal, while sales of the big-selling midsize Toyota Camry were flat last month. Sales of Toyota-brand cars as a group were down over 11% from a year ago. 

The Lexus luxury brand fared even worse. While its crossovers did well as a group, its car sales were even more dismal: Every model in the lineup was down by double-digit percentage points from January of last year. As a group, Lexus's car models posted a 25.8% sales decline for the month.

That's troubling.

Toyota put a brave face on the results, but the numbers weren't good
The U.S. general manager of the Toyota brand, Bill Fay, tried to put a good spin on the results. "For Toyota division, RAV4 led the way with a record January. And pickup truck sales continued to rise, setting a new January Toyota division light-truck record."

His Lexus-brand counterpart, Jeff Bracken, did much the same. "The appetite for crossovers and SUVs in the luxury market has continued to drive customers to Lexus," he said. "In January, our new vehicle sales were propelled by the all-new RX crossover and the NX, which continue to exceed sales forecasts."

A 2016 Lexus RX 350. Image source: Toyota.

It's absolutely true that the Lexus RX (up 5.9%) and NX (up 11.4%) did decently well in January. But total U.S. sales for the Lexus brand were down 9.5% in January, and that's a big hit. 

The weather didn't help, but apparently neither did discounts
To be fair, Toyota didn't get any help from the weather in January. Big snowstorms in the northeast U.S. (a Toyota stronghold) kept customers away from showrooms for part of the month. 

A quirk of the calendar that gave last month two fewer selling days than January of 2015 didn't help, either. (Selling days exclude Sundays and holidays, when many auto dealers are closed.) 

However, it looks like Toyota and Lexus dealers in the U.S. got some help from the factory. TrueCar estimates that Toyota's per-vehicle incentives for its three brands (Toyota, Lexus, and Scion) combined rose to an average $2,193 per vehicle, up 21% from a year ago. 

Slumping sales plus rising discounts = a worrisome combination
The concern here is that after a record year for U.S. auto sales in 2015, automakers may find it difficult in 2016 to generate the year-over-year growth that investors (and managers of sales executives) demand. Automakers may feel the need to resort to bigger discounts in order to show sales growth, but those discounts will cut into profit margins. 

This is just one month, and there are a couple of reasons to think it might be a fluke. Some of Toyota's key competitors managed good sales gains in January without resorting to big boosts in incentives. But one of the things auto investors need to watch for is a trend of rising discounts as sales gains shrink, something that traditionally happens after a sales cycle peaks.

It's just one month. It's too early to say U.S. auto sales are headed downhill. But results like Toyota's in January mean we need to be watching carefully from here.

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