U.S. Auto Sales Plunged in May

U.S. auto dealerships grew a bit slower in May as demand for new cars continue to ease forcing auto manufacturers to rely more heavily on car rental sales and other bulk buyers to keep the production line buzzing.

auto graph

Americans bought 1.54 million cars and light trucks in May, according to a report from Autodata Corp. The numbers are down 6% year over year and it is largely because of two fewer selling days last month. However, sales were up modestly after adjusting seasonal factors.

But all the other important measures fell last month compared with the last year, including annualized sales pace and consumer purchases at used cars Surrey BC, fueling worries that the demand in the worlds most profitable automotive has peaked.

General Motors Corp., the country’s largest auto maker posted a sharp decline in sales after focusing more on retail buyers. Toyota Motor Corp. also reported a sharp drop in sales figures, corroding U.S. market shares for two of world’s biggest auto makers in the world in 2016.

According to General Motors Corp, sales to individual consumers fell almost 10.6% in May. Such sale figures are considered the best indicator of current market demand.

A U.S. market halt would be a reason to worry because other important vehicle markets are either shrinking or still trying to recover from the 2008-2009 financial crisis. Brazil and Russia are still down significantly, China is offering sales tax discounts on fuel sales gains, while Europe only returned pre-crisis volumes in April.

According to Thomas King, a vice president at market research firm J.D. Power, U.S. retail sales are declining after six years of tremendous sales gain because such momentum can no longer be sustained by the available auto buyers. Restrained demand of vehicles has been ample after the financial crisis, largely due to the industry’s base was so severe. However, that trend is being stressed by leased vehicles returning to dealers, boosting the supply of older used cars.

Sales stimuli have also been loomed up to 11% in May compared with the last year’s May, eclipsing $3,000 per vehicle on average, according to the Autodata report. Incentives include increased usage of subsidized leases helping keep car payments low even as sticker prices rise into higher levels.

Some auto dealers in New York City says there are signs of demand elevating, but to attain last year’s 17.5 million mark, there need to be a huge surge in auto sales.

If retail sales continue to decline, analysts say auto manufacturers will need to further boost discounts or trim output levels that have grown at a consistent pace since the financial crisis. Even some auto dealers say time has come for that to happen.

Overall, the pace of auto sales has been slowing since the auto manufacturers have booked a string of outstanding gains in late 2015. The Seasonally Adjusted Annual Sales Rate or SAAR in May was 17.45 million vehicles, a strong volume number by historic standards, but still way behind the pace set in last year’s May and also fall short of the 18 million plus level set late last year. A discouraging figure for auto makers for sure who are already looking increasing sales by boosting incentives and rely heavily on Memorial Day bonanzas to spark the summer auto sales.