Ford continues to see demand for its profitable light trucks, while GM's crossover retail sales grew.
By David Whiston, CFA, CPA, CFE | 07-03-17 | 04:46 PM | Email Article

Automakers reported June U.S. light-vehicle deliveries to end customers on July 3. The seasonally adjusted annualized selling rate per Automotive News came in at 16.54 million, down from 16.82 million in June 2016 and the lowest SAAR of 2017. June sales declined 2.9% year over year to 1.475 million. 

David Whiston, CFA, CPA, CFE, is an industrials strategist for Morningstar.

The fleet business had been making up a lot of the sell-down through May, but it appears June’s retail channel--that is, nonfleet--business softened, though not enough to make us change our 2017 forecast of 17.0 million-17.2 million.

LMC Automotive forecast in late June that the June retail SAAR would come in at 13.1 million, the lowest for June since 12.0 million in 2012, but not far off from June 2016’s 13.2 million. Ford also confirmed our February prediction that the industry’s total sales peaked for the cycle in 2016 at 17.54 million, with its head of U.S. sales saying on a July 3 call that even a strong second half of 2017 would not be enough for the industry to eclipse 2016’s full-year total. This is not surprising news to us, but it’s also not a reason to think sales are about to fall off a cliff, as June light-truck sales from several automakers looked fine to us.

 Ford’s total sales fell 5.1% year over year, but its retail sales were flat. Fleet sales fell 13.9% and fleet made up 33.2% of June sales, down 340 basis points from June 2016. The rental mix fell 240 basis points to 13.2%. Ford keeps having good demand for light-truck models, with trucks up 1.2% and SUVs up 3.2%, but car offerings fell 23%; even the iconic Mustang declined 37%. Cheap gas prices and more space for not a lot more money continue to move Americans to light trucks over car models. Ford’s most profitable vehicles are light trucks, so we are not worried about the headline sales numbers.

 GM’s total June sales fell 4.7% year over year while retail sales fell 3.1%. Only Buick posted a retail gain for June, up 6.2% thanks to Envision crossover sales more than tripling to 5,007. Chevrolet, which constituted 68.5% of GM’s retail sales in June and 69.8% of GM’s overall sales for the month, posted a 1.5% decline in retail volume, which probably came primarily from car models. We say that because Cruze compact sedan sales fell 31% including fleet and Malibu declined 33%. The Impala full-size sedan probably saw a large fleet pullback in June as its total deliveries fell 77.2%, or 9,527 units. GM’s crossover retail sales grew 23%, so we are not worried that consumers deem its product undesirable.

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David Whiston, CFA, CPA, CFE does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.
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