This Week in Car Buying: May sales sag; Chevy’s new incentives; Minivan comeback
If you’re in the market for a new family car, the full- and mid-size sedan segments are ripe for picking. Sales of 4-doors were down 25 percent as May sales slid six percent overall, due in part to two fewer selling days, factory shutdowns as the result of a Japanese earthquake and a shift away from fleet deliveries.
Even though totals slipped, the year-to-date sales pace is still on track to exceed 17 million units in the 2016 calendar year. According to Kelley Blue Book analyst Tim Fleming, “The total number of light vehicles sold by major manufacturers was 1,531,875 units, equaling a SAAR (Seasonally Adjusted Annual Sales Rate) of 17.4 million and a year-over-year decrease of six percent. This was in line with our expectations.”
Fleming added that “Even though overall sales declined in volume, this is primarily due to having one fewer weekend this May compared to last year, and the SAAR actually increased slightly from April’s rate. Sales of non-luxury cars were particularly soft in May, down 15 percent, while subcompact and compact SUV’s increased five percent to make up more than 20 percent of May’s total sales.”
The Kelley Blue Book forecast for 2016 sales remains between 17.5 and 18 million units, which would range from a flat year to 3-percent growth. Through May, sales totaled 7.1 million units, a 1-percent increase over last year.
While the industry expected lower sales as a result of having fewer selling days, a Japanese earthquake led to temporary closures of Toyota plants there and four GM plants in the U.S. Toyota saw a 9.1-percent decline in year-over-year sales, while GM experiences an 18-percent drop. The U.S. auto giant said it expected the decline as part of its effort to de-emphasize daily rental fleet deliveries.
Chevy’s new incentives
Hot on the heels of the May sales report, Chevrolet announced a new round of incentives, some focused on its successful Silverado pickup in an effort to recapture share lost to rivals Ford and Ram. The Chevy pickup saw its slice of the market drop more than a point from 22.5 to 21.3 percent. The plants producing Silverado were among those affected by the Japanese earthquake that disrupted the supply chain.
According to Automotive News, which obtained a note sent from Chevrolet management to its dealers, the division will be offering up to $8,250 in cash on some crew-cab Silverado models, along with 5-year 0-percent financing. The company says its incentive spending has been below its competitors, pegging it at 9.8 percent of average transaction prices compared to 10.6-percent industry average, according to J.D. Power research.
Reflecting weak demand for full-size sedans, Chevrolet will also offer 20 percent off the sticker of its top 2016 Impala model, the LTZ, which is eligible for $8,025 cash back through June 15. Slow selling economy cars including the Sonic and Spark, are also eligible for 20-percent discounts. Owners of non-GM vehicles can get an additional rebate of $750 as part of a bid to increase conquest sales. The new 2016 Chevy Cruze and redesigned Malibu are also offered with $500 rebates on top of that conquest sales promotion.
Minivans make comeback
One of the few manufacturers to post a gain in May was Fiat Chrysler Automobiles, which eked out nearly a point more in sales thanks largely to its hot Jeep unit and surprisingly, minivans. Jeep experienced a 14-percent boost in sales with a bit of the old and new, with solid gains by Compass and the Renegade. But even more surprising is the strong showing by Chrysler’s aging Town & Country and Dodge Grand Caravan minivans. Increased sales of those two models helped the minivan category grow 15.6 percent overall versus last May.
Of course, these year-over-year comparisons in which the Town & Country grew by nearly 50 percent with 8,583 sold and Dodge up by 76.2 percent with 11,135 retailed, are somewhat deceptive. It was a year ago that FCA shut down the Windsor, Canada assembly plant to retool one of the lines for the 2017 Chrysler Pacifica, which replaces the Town & Country. Still, as Pacifica begins to roll into showrooms, Chrysler still has Town & Country models to clear out, which it has been doing with $4,500 cash back or 1.9-percent financing for 84 months. That model was built alongside the Grand Caravan through March 21. Meanwhile, the Dodge will remain in production into the 2017 model year and is being offered with a $3,500 rebate when financed through Chrysler Capital. So far this year, FCA has sold more than 100,000 of the two models combined.
Having these older models around will allow the company to build and sell higher-priced and higher-content 2017 Pacifica models as production ramps up, while still giving bargain shoppers an alternative in the previous generation vehicle.
Transaction prices jump
Even though sales slowed during May, ever-increasing transaction prices did not. According to Kelley Blue Book, the estimated average transaction price for light vehicles was $33,845, a $1,139 or 3.5 percent increase over last year. The average price did drop $116 or 0.3 percent from April to May.
“Continuously growing demand for SUVs and trucks helped push overall average transaction prices up this month,” said Tim Fleming, analyst for Kelley Blue book. “The overall share of light trucks in May 2016 should be around 60 percent, up from 55 percent in May 2015. The Detroit automakers are benefitting the most from this trend, as their transaction prices are up between 4-6 percent. Manufacturers focused on car-heavy lineups are still seeing year-over-year strength, but at a much more model level.” In general, hot selling trucks and SUVs are commanding higher prices than slower selling traditional cars.
Among those seeing higher prices include Toyota, which recorded a 5.2-percent gain in ATP largely on the popularity of the redesigned Tacoma, which saw its transaction average grow 12 percent. Volkswagen Group, which actually saw an increase in revenue as overall volume decreased, was able to net 3.7 percent more per sale as a result of Audi and Porsche, as well as specialty models like the Golf R.
Speaking of Volkswagen, the German automaker showed the #Pink Beetle production model. The limited edition #Pink Beetle is due this fall as a 2017 model.
VW’s upscale division launched the 2017 Audi A5 and S5 Coupe at its Ingolstadt, Germany, headquarters. The redesigned coupe sports a new look as well as an updated interior.
Summer’s here, so now’s the time to drop the top on a 2017 Mini Cooper S Convertible and take to the open road. Catch our Quick Take here.
Shopping for a new car? Check out these helpful advice articles: