DETROIT (Reuters) - U.S. auto sales fell 14 percent to their lowest annual rate in a decade in April as weak consumer confidence and rising gas prices hit the industry's most profitable vehicles hardest.
By David Bailey
DETROIT (Reuters) - U.S. auto sales fell 14 percent to their lowest annual rate in a decade in April as weak consumer confidence and rising gas prices hit the industry's most profitable vehicles hardest.
General Motors Corp, Ford Motor Co and Chrysler LLC posted deeper sales declines than expected, led by a sharp drop in trucks and SUVs. GM sales fell 23 percent, Ford 19 percent, and Chrysler nearly 30 percent, the automakers said on Thursday.
Asian competitors also struggled, with Toyota Motor Corp posting a 5 percent decline, and Nissan Motor Co sales dropping almost 2 percent.
!ADVERTISEMENT!Auto sales represent one of the first monthly snapshots of U.S. consumer demand, and investors have looked to the reports for evidence of whether the U.S. economy has slipped further toward recession since the start of the year.
The returns were bleak.
"Almost no one buys new vehicles because they have to, they want to. And in order to want to they have to feel good about their future," said Erich Merkle, director of forecasting for consulting firm IRN Inc. "That's just not the case today."
Overall U.S. sales fell to about 14.4 million units on an annualized and seasonally adjusted basis in April, marking the worst result for the industry since August 1998, according to Autodata Corp.
Of equal concern to automakers, buyers defected from high-margin trucks and SUVs to cheaper and more fuel-efficient cars more rapidly than expected due to high gasoline prices.
Cars accounted for 53 percent of sales in April with light trucks near 47 percent, a nearly complete reversal of the share of the categories a year earlier, according to Autodata.
The market shift toward cars has favored Japanese automakers with more established small car offerings.
By contrast, the trend has pummeled the truck-heavy lineups of Detroit-based automakers with the average price of regular unleaded gasoline punching above $3.62 per gallon on Thursday, a record high, according to AAA.
The three Detroit-based automakers had just a 48 percent share of the world's largest vehicle market in April, down 5 percentage points from a year earlier.
But even Toyota, now the world's largest automaker and No. 2 in the U.S. market, faced pressure in April as a decline in its truck sales more than offset gains for small cars like the Yaris and the Prius hybrid.
EXPECTATIONS UNDER PRESSURE
In recent weeks, all major automakers have scaled back expectations for 2008 U.S. auto industry sales.
"They are doing OK relatively speaking with their cars and crossovers, but that is not going to really help their bottom line since they tend to make the majority of their profits from SUVs and trucks still," Jesse Toprak, an analyst at industry tracking firm Edmunds.com, said of the U.S. carmakers.
Toprak said he does not expect a dramatic change in consumer-buying patterns for the rest of the year given the overhang of high gas prices and weak consumer confidence.
First-quarter U.S. auto sales fell to a 15.2 million annual rate, and both Ford and GM said they now expect the current quarter to mark the trough of the downturn.
Toyota expects sales in the low 15-million unit range for 2008 as a whole, down from 16.1 million a year earlier and its own forecast for an almost-flat year for the industry.
Automakers sold about 1.25 million vehicles in April, down almost 14 percent after adjusting for two additional sales days last month compared with a year earlier and seasonal factors.
Results for the major automakers were reported on that basis, the measure favored by Wall Street analysts.
Honda Motor Co Ltd delayed full sales results due to a technical problem, but said April sales rose about 6 percent before adjustment.
Automakers have held out hope that a U.S. fiscal stimulus and interest rate cuts would support auto sales in the second half of the year.
GM still expects a second-half recovery, but probably less robust than it thought at the start of 2008. The automaker also is fighting through a strike at parts maker American Axle & Manufacturing Holdings Inc that has cut deeply into production of SUVs and trucks.
Overall, automakers increased their sales incentives by about 2 percent in April from a year earlier to an average of $2,449 per vehicle, according to Edmunds. That figure is heavily weighted toward large trucks.
Year-over-year, incentives at Chrysler and Nissan declined, Ford's rose slightly, and GM, Honda and Toyota were up, according to Edmunds.
(Additional reporting by Kevin Krolicki and Soyoung Kim; Editing by Braden Reddall/Jeffrey Benkoe)
