Bigger Vehicles Hog Road to Sales Gains -- WSJ
April 04 2018 - 3:02AM
Dow Jones News
Strong tally for March reflected extra selling day, better
weather, increased incentives
By Adrienne Roberts and John D. Stoll
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 4, 2018).
To understand why the auto industry pushed the Trump
administration to roll back emissions rules, take a spin in Ford
Motor Co.'s flashy new Lincoln Navigator SUV.
Revamped for 2018, the hulking sport-utility vehicle is designed
for an era of low gasoline prices. Customers flocked to Lincoln
dealerships in March and shelled out an average $81,000 for its
latest Navigator, Ford said, nearly 50% more than the outgoing
model.
The Ford vehicle was among the biggest gainers in the U.S. auto
market last month, according to industry sales reports published
Tuesday, notching a 91% increase that mirrors results of other
redesigned SUVs hitting the market -- including Ford's Expedition,
Jeep's Wrangler and Cadillac's XT5. For instance, the pricey
Wrangler, once a rough-and-tumble niche SUV, now outsells the
entire eight-vehicle passenger-car lineup of parent Fiat Chrysler
Automobiles NV.
Even as U.S. auto sales plateau, car companies stand to gain as
consumers increasingly flock to the kinds of vehicles that would be
less viable under emissions standards enacted by the Obama
administration. The Environmental Protection Agency is easing those
fuel-economy rules, making it more likely Detroit's Big Three and
foreign rivals will sharpen the focus on profitable pickup trucks
and SUVs that achieve much lower miles-per-gallon than the hybrids
and smaller cars favored by the old mandate.
Overall U.S. auto sales were strong in March, aided by an extra
selling day, strong incentives, fleet sales and a step-up in
showroom traffic hampered by bad weather earlier in the year.
The shift toward larger vehicles remains the trend to watch,
according to Jack Hollis, Toyota Motor Corp.'s North America sales
chief, with the expectation that 70% of the overall market will
soon be devoted to trucks and SUVs. In 2012, passenger cars still
accounted for just over half of the market, according to AutoData
Corp.
Higher sales of those models generally lead to meatier
transaction prices at dealers since U.S. consumers will pay a
premium for space or capability. This has a wide range of auto
makers, from Nissan Motor Co. to Volkswagen AG, committing to stuff
even more variants of SUVs into the dealer pipeline in coming
years.
Though its March sales were a modest 1,711, the Lincoln
Navigator is a proxy for America's appetite. Ford's sales chief,
Mark LaNeve, said Tuesday the company has only a two-week supply of
the SUV on dealer lots and "we're not sure we can meet demand all
year."
Toyota's Mr. Hollis said "there may be [parts] of the SUV market
that we should be looking at." For a brand known for fuel-sipping
passenger cars, expanding SUV offerings will be essential if the
Japanese auto maker aims to improve its U.S. market share.
Others are tracking the same trend. Honda Motor Co. will cut
Accord sedan production in Ohio amid slack demand for
fuel-efficient products. That follows moves by Detroit auto makers,
including General Motors Co., to back away or even discontinue
slow-selling passenger cars in favor of boosting supply of bigger
products.
The car business is a relatively low-margin industry with long
product cycles and enormous capital costs. That puts pressure on
executives like Mr. Hollis to make accurate calls on consumer
trends, and double down on vehicle segments that offer the biggest
profits.
Because prior emissions standards called for an average of 50
miles per gallon in auto-maker fleets by 2025, the 20-mpg Navigator
or Wrangler would need significant investment -- including costly
batteries -- that would eat into the bottom line.
Nearly all of the biggest auto makers posted sales gains in
March, an exception being Nissan. The month's seasonally adjusted
annual sales rate came in at 17.48 million vehicles, compared with
16.8 million for March 2017, according to AutoData.
GM sold 296,341 vehicles in March, a 16% increase compared with
the same period in 2017, with all of its brands achieving
double-digit gains for the month. The March tally marked the end of
a tradition for GM, as the company will begin reporting sales on a
quarterly basis.
Fiat Chrysler said sales were up 14% in March at 216,063
vehicles, while Ford sales rose 3.5% to 243,021, driven by a 9%
increase in sales to fleet buyers.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and John
D. Stoll at john.stoll@wsj.com
(END) Dow Jones Newswires
April 04, 2018 02:47 ET (06:47 GMT)
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