If Automakers Thought June Was Bad

No Relief in July as New-Car Sales Continue to Drop; but Prius, Compact SUVs Move Off Lots

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DETROIT (AdAge.com) -- Only one car company, American Honda Motor Co., is expected to show a rise in new-vehicle sales when otherwise bleak July results are tallied later this week.
Toyota Prius
Demand for the hybrid Toyota Prius is strong.
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Honda will be up near 5% in unit sales for the month when adjusted for the extra two selling days this year vs. last, said Jesse Toprak, exec director-industry analysis for auto info site Edmunds.com. The biggest loser in his forecast is General Motors Corp., down 22% for July; followed by Chrysler, down 21%; Ford Motor Co., down by 15%; Toyota, down 11% and Nissan North America with 8% fewer units sold vs. a year ago.

Prius production
Ironically, Toyota suffered because it couldn't make the Prius fast enough. The hybrid is the auto industry's hottest model, flying off dealer lots in four to five days, said Tom Libby, senior director of industry analysis at J.D. Power and Associates' Power Information Network. He said demand is so strong for the Prius that a used 2008 model with almost 8,000 miles on it sold for almost $1,300 higher in June than a new one at $26,672.

Mr. Libby said Power Information Network data supports anecdotal information that dealers are contacting Prius owners and offering to buy back the hybrids at their original sticker prices. The dealers are then able to sell the car at a higher price and presumably make a profit twice on the same car.

But because it doesn't have enough Prius models to go around, Toyota slid into decline, Mr. Toprak said. If the marketer had more small cars or Prius hybrids it probably could have doubled sales in those segments. "Toyota was caught off guard; even Toyota didn't get the supply right," he said.

New-vehicle sales drop
Overall, the industry's new-vehicle sales in July will be 1.26 million, off by 10.7% when adjusted for the two extra sales days, and, when not adjusted, down 3.3%, said Mr. Toprak, who called 2008 the industry's worst U.S. sales year since the early 1990s.

The vehicle segment he sees performing best in July is the compact SUV, which Mr. Toprak projected would jump by 64% in the month compared to a year ago. The category includes the Toyota RAV4, Honda's CR-V and Ford's Escape. He said compact cars continue their sales march upward, rising by 27% year-to-year.

Mr. Libby said that in the crowded midsize sedan category, Chevrolet's redone Malibu moved faster off dealer lots (in 23 days) than Toyota's Camry (35 days) and Honda's redone Accord (52 days) from Jan. 1 through July 20. And the Malibu enjoyed a higher transaction price of $22,780, or $515 more than Camry's this year, Power Information Network data shows.

GM spent an estimated $100 million to launch the redone Malibu in an integrated, three-phased blitz from Campbell-Ewald, Warren, Mich., that started last year. Mr. Libby said the Honda Accord has "shown some softness since its redo" last fall. RPA, Santa Monica, Calif., is the agency for the brand.

Surprise over pickup data
Mr. Libby said with all the bleak news about large pickups this year, he was surprised to see owner loyalty start to revive in the last week of June and carrying through his latest data of July 20. He believes the shift was mostly driven by GM's zero-percent-financing deals, which started then and were extended through July. McCann-Erickson, Birmingham, Mich., developed the overall creative for what GM initially called a 72-hour sale.

Chrysler also has hefty deals on its Dodge Ram pickup to clear out old inventory before a new one arrives this fall. The Ram is also among the models under the automaker's "Let's Refuel America" promotion offering $2.99-a-gallon has for three years on many of its models. Chrysler introduced the gas program in early May via ads from BBDO, Troy, Mich., and later extended it through July 31. But Mr. Libby said the incentive "hasn't seemed to move the needle" on sales.

Ford is offering employee pricing on its F-150, although the marketer announced in recent weeks that the redone model would be delayed two months later than its planned fall launch.

It's not just big trucks taking it on the chin. Mr. Libby said the sales of large, non-luxury cars dropped by 43% last month, and a 29% decline for the first half of the year compared to a year ago makes the category the third worst behind full-size pickups and big SUVs. That large-car segment's share of June's total industry sales was 4.83%, down almost 3 percentage points, or 38%, from a year ago.
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