U.S. Auto Brands' July Sales: Lackluster, Modest, Restrained

If the American auto industry, the Obama administration and U.S. consumers have their way, today’s reports of cars sales in July will mark the end of a low-water mark for the year in an important gauge of economic health: auto-sales momentum.

Just about as President Obama was announcing the signing of Congress’s debt-deal bill, major auto brands were reporting July sales that, in aggregate, ran at a pace slightly faster than June sales, somewhere over 12 million units on an annual basis.

While disappointing compared with industry expectations for the summer at the beginning of the year, the results are something that automaker executives are almost glad to see, given the circumstances. And they were heartened enough by today’s results to stick with their full-year forecasts of around 13 million sales for 2011, which would comprise the second consecutive double-digit yearly gain for the U.S. market.

Consumer confusion and loss of confidence over the debt-ceiling debate marked July. There has been a decline in manufacturing activity and continued stubborn unemployment. Many Japanese vehicles and even some domestic small cars, such as Ford Focus, remain in short supply. In view of such factors, more Americans could have lost the determination required to make a vehicle purchase in July.

But in fact, sales for the American Big Three were up by at least single digits over a year-ago — Ford reported July's overall U.S. sales up 9%, General Motors said its July sales were up 8% for passenger vehicles and 20% for crossover, while Chrysler reported its best July since 2007 with 20% growth — as Japanese brands showed signs of recovery from their North American supply problems.

“The sales rate was better than we would typically have expected given the plethora of negative news headlines during the month,” said George Pipas, head of U.S. industry analysis for Ford. “They did take a toll on consumer sentiment, but the auto-sales picture was a different story. By late summer, we expect sales rates to return to something like we saw in the earlier part of the year.”

The New York Times said the July figures showed "restrained growth," putting Detroit's Big Three in the context of other automakers:

Sales fell 28.4 percent last month at Honda and 22.7 percent at Toyota compared with July 2010. Both companies have been struggling to meet demand because of parts shortages caused by the earthquake and tsunami that struck Japan in March. Most other major carmakers reported modest increases, including gains of 7.6 percent for General Motors and 6.1 percent for the Ford Motor Company. Nissan, whose production was not significantly disrupted, said sales were up 2.7 percent. Chrysler’s sales rose 20.1 percent “in a market that remains tougher than a cheap steak,” its head of United States sales, Reid Bigland, said in a statement.

With the debt situation out of the headlines and more Japanese cars back in the market, more American consumers may veer toward auto showrooms in the second half. Still, it's not cause for celebration yet.

IHS Automotive analyst Rebecca Lindland expressed caution to Bloomberg TV today, commenting that Ford's U.S. sales rose less than analysts' estimates in July while GM predicted that industrywide deliveries may be little changed from a year earlier as consumers reduce spending, although she's more optimistic about luxury sales.

Auto analyst Alan Baum also commented to Bloomberg that the July sales, while "lackluster" and "pretty modest," should rebound by the end of the year, and pointed to Hyundai as an automaker to watch.