Despite the headlines showing a 0.4% decline in U.S. auto sales during January, it really wasn't all that bad a month for the industry. Automakers in general posted better results than many analysts had predicted, and the seasonally adjusted annualized selling rate climbed to 17.55 million, the highest January level since 2006, according to Automotive News.
Leading the industry's charge were Nissan and Hyundai, which both set January records, and Fiat Chrysler Automobiles, which posted a strong 7% gain over the prior year. But January was rough for a handful of automakers. So here are the lowlights from the biggest losers.
No surprise with Volkswagen
Raise your hand if you're surprised to see Volkswagen Group (NASDAQOTH:VWAGY) on this list of biggest losers. Anyone? After the company's very public, and very nasty, diesel emissions cheating scandal, sales were expected to fall dramatically. Sure enough, Volkswagen brand sales dropped nearly 15% in the U.S. during January, the third consecutive month of declines for the company's tarnished marque.
The decline in Volkswagen-branded vehicles pulled overall Volkswagen Group sales down 7% last month, though January was partially salvaged by a near 3% gain in Audi's U.S. sales. The Golf and Passat were hit particularly hard, posting respective sales declines of nearly 52% and more than 43%, respectively, compared to January 2015.
Mark McNabb, chief operating officer for Volkswagen of America, had this to say in a press release: "January sales numbers were down due to the seasonal nature of the fleet business. Despite that and the weather conditions in the Northeast portion of the country, Volkswagen dealers improved in terms of retail business."
While I'm sure there's some truth to the fleet business excuse, because the timing of fleet sales can lead to random differences between months of sales, it's still almost laughable to attempt to ignore that the emissions fraud scandal that has beaten down VW's brand image is likely the chief culprit in its sales declines. For the past three months, Volkswagen brand sales were down 16% compared to previous year's numbers, and investors shouldn't expect its losing trend to reverse in the coming months.
It was a tough month in general for sales of cars, while SUVs continued to fly off dealers' lots. Toyota's (NYSE:TM) total U.S. sales declined 4.7% to 161,283 last month, stalled by a struggling passenger car lineup. Toyota's best-selling vehicle in the U.S., the Camry, managed to post a 0.3% sales gain to 26,848 units, but it wasn't near enough to salvage Toyota's car division, which posted an 11% sales decline.
Furthermore, when one of the company's bulleted highlights reads, "Camry sales up year-over-year," you know it was a tough month -- because if that's among the statistics most worth highlighting, the pickings were slim. Corolla sales took an especially steep plunge, dropping more than 18% to 22,362 units, which is painful news considering that it's Toyota's second best-selling car.
On the bright side, it could have been much worse if Toyota's Rav4 hadn't recorded a near 9% gain from January 2015 to over 21,000 units. That increase, along with a strong sales month from the Tacoma and Sienna, really salvaged what could have been a terrible kick-off to 2016. That said, Toyota relies primarily on car sales to drive its profits, and as long as the trends continue to favor SUVs and trucks, it could continue to lag the industry in sales gains, or it could be forced to increase incentive spending to maintain its market share. Neither of those is a great option for the company and its shareholders.
Ford hits a speed bump
On one hand, Ford Motor Company (NYSE:F) just posted record pre-tax profits for its fourth quarter, so that's a win. On the other hand, its U.S. sales declined 3% last month compared to the prior year. The automaker's numbers seem even worse when you consider that Ford's retail sales fell 11% in January, while rival General Motors which posted a 9% retail sales gain. Furthermore, Ford's total sales decline was in spite of a 20% jump in fleet sales last month, compared to January 2015.
Now, over the course of a full year, the timing of large fleet orders will impact monthly results inconsistently and at odd intervals, so that jump should be taken with a grain of salt. However, a 3% decline in total sales even with the helpful tailwind of a 20% increase in fleet sales reflects a month that, in my opinion, was worse than the overall numbers make it appear.
Results from Ford's most important product line, its F-Series trucks, were also mixed. America's best-selling vehicles for 34 years running recorded a sales decline of more than 5%. However, investors should keep in mind that the F-Series was coming off a stellar December, when it posted sales of over 85,000 -- the first time in over a decade that F-Series sales topped 80,000. On a brighter note, the F-Series posted a $2,500 increase in average transaction prices and a $500 decline in incentive spending last month.
It certainly feels like Ford hit a speed bump in January, but let's wait and see how the company fares in February before sounding any alarms. As long as transaction prices on its F-Series stay cranked up and incentive spending stays low, Ford's profits will keep piling up.