Sudden slide in vehicle sales leaves dealerships puzzled

Last month's figures mark worst June total in years

July 29, 2004|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

You could blame it on high gas prices, skittish customers or less-than-generous incentives from car dealers.

Vehicle sales have taken an unexpected drop and automakers still haven't figured out why. U.S. sales of new cars and trucks fell 2 percent from last year to 1.44 million vehicles in June, the latest figures available, according to research firm Autodata Corp.

The decrease - which produced the worst June in recent years - left dealers scratching their heads and scrambling to offer deals to bring customers back.

"It wasn't a typical June," said Sheldon Jones, general sales manager at Frankel Cadillac, Pontiac and GMC in Owings Mills. "To slow up in June is unusual."

Analysts and dealers say there is no one reason for the decline. Some say incentives were so good in May that consumers were waiting for those deals to come back. General Motors Corp. and Ford Motor Corp. raised rebates this month. GM sales were down 12.1 percent and Ford's slumped 7.8 percent. In some cases, consumers were opting for mid-size trucks and minivans, sending sales of large SUV's spiraling down.

Some blamed part of the drop on record gas prices, which peaked at $2.05 for regular in Maryland last month.

"I don't think it was as big of a gloom story as some say it is, but it did impact the mindset of some people," said Mike Chung, a pricing and market analyst at Edmunds.com, an automotive research site, of the high gas prices.

"There were the people who were on the fence who generally didn't purchase because they were waiting for the gas prices to go down," Chung said.

The state of the auto industry is important to the country's health because it makes up 3 to 5 percent of its economic activity.

The June decline in auto sales helped push total retail sales for the month down 1.1 percent - the largest decline in 16 months.

Although not as busy as the end of the year when dealers are making room for new models, June is normally a solid month for car sales. May sales beat forecasts and rose 3.4 percent, the best sales month this year, and manufacturers expected that June would do just as well.

"It just seems like lately the car market is much more volatile than it was in the past," said Andy White, general manager at Don White's Timonium, Chrysler, Dodge and Jeep. "It changes pretty quickly. It used to be cyclical."

The declines weren't across the board.

Bob Frankel, who owns several Baltimore-area dealerships, including Frankel Cadillac, Pontiac and GMC, saw a decline in sales of General Motors cars. But sales at his Acura dealership jumped 12 percent. At the same time, sales at his Range Rover dealership fell 20 percent.

Sales for DaimlerChrysler were up 4.9 percent in June. The robust showing was due in part to several new models of cars, particularly the Chrysler 300 sedan. There are waiting lists to purchase the car, which has been dubbed the affordable Bentley because it looks similar to the luxury car.

"It's a strategy of Chrysler," said Steven Szakaly, an economist with the Center for Automotive Research. "They tend to pull off one of those miracle cars every few years - a really great car that everyone will want."

For now, industry analysts are calling last month's drop a small transgression. They expect that May's strong sales will average out June's unexpected showing.

Early signs, although all anecdotal, show that customers may indeed be returning to the showrooms this month.

"Sales for the industry are picking up again as we head into the summer selling season," said Deborah Silverman, a spokeswoman for General Motors.

"This was not a disaster," said Frankel. "This was a small blip."

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