Slowdown in Car Demand Expected -- WSJ

By Adrienne Roberts

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 (September 5, 2018).

Most major auto makers reported increases in U.S. sales in August, though analysts expect vehicle demand to cool for the remainder of 2018 amid higher interest rates and rising vehicle prices.

Overall U.S. auto sales were expected to rise slightly in August, but General Motors Co.'s worse-than-expected month dragged down the industry's tally, resulting in flat sales. Customers took advantage of Labor Day discounts against a backdrop of a healthy U.S. economy, analysts said. Consumers continued to flock to sport-utility vehicles and pickup trucks, helping push the average selling price to $31,836 in August, market research firm J.D. Power said.

The year-over-year comparison benefitted from weak sales in August 2017, when Hurricane Harvey forced the closure of hundreds of dealerships in southeast Texas, denting the national total.

Sales are expected to cool in coming months with such factors as rising interest rates, higher vehicle prices and the threat of tariffs on automotive imports prompting customers to consider buying a used car or delay a vehicle purchase altogether, analysts said.

"All the positive economic news can't overtake the worsening buying conditions for consumers," Charlie Chesbrough, senior economist for Cox Automotive, said. He said he believes the U.S. auto market, which peaked in 2016 with a record 17.6 million vehicles sold, is tracking about two years ahead of the broader economy.

Still, the car business remains historically strong, on pace to reach U.S. sales of about 17 million vehicles this year. The shift toward higher-price SUVs and pickup trucks continues, which should help bolster auto makers' bottom lines.

SUVs, pickup trucks and vans accounted for about 68% of new-vehicle retail sales in August, the highest-ever level for the month, said J.D. Power. Consumers were expected to spend $41.1 billion on new vehicles in August, $1.5 billion more than last year's level, the company said.

"There are lots of reasons to be optimistic," Mark LaNeve, Ford Motor Co.'s U.S. sales chief, told reporters on a conference call. "The underlying factors that we want to be positive are positive," including a low unemployment rate and a strong stock market.

Ford, Honda Motor Co. and Nissan Motor Co. reported percentage sales increases in the single digits, gains driven by their SUV lineups. Fiat Chrysler Automobiles NV said sales increased 10% in August, propelled by its Jeep and Ram pickup brand. Sales of the Jeep Cherokee rose 85%, and sales of the Jeep Compass increased 76%.

GM sales declined 13% for the month, according to a person familiar with the matter, missing analysts' expectations of about an 8% drop. GM officially reports sales quarterly.

Toyota Motor Corp. reported a slight decrease, with sales of the auto maker's flagship Camry sedan dropping 19%.

--Mike Colias contributed to this article.

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com

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September 05, 2018 02:47 ET (06:47 GMT)

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