Higher inventories point to a slowing market, which in turn could spark increases in incentives on 2017 models as makers look to protect their share of sales. According to Automotive News, the industry’s inventories stood at a 64-day supply based on the current sales rate. In other words, at current levels it would take 64 days to sell down all the vehicles being carried in dealer stock.
While just 4 days higher than what is considered ideal, the number is up from 61 days just a month earlier and the 60-day level of a year earlier. Subaru continues to have the tightest supply at 23 days, while Mitsubishi has the most at 127 days.
Even one of the hottest segments, subcompact crossover SUVs, are seeing stocks rise, which may point to cooling demand for these so-called sport cutes. Jeep, which has experienced growth in overall sales and market share, has seen stocks of its well-received Renegade climb from 93 to 114 days’ supply with some 31,000 units on the ground. The Fiat 500X, which is based on the same platform and built in Italy alongside the Renegade, is also plentiful, with 138 days’ inventory on hand. Both models have incentives on 2016 models (as much as $2,500 for the Jeep and $1,500 for the Fiat), but no spiffs for 2017 models, yet.
Even Honda is seeing inventories building on its HR-V, which has grown from 93 to 106 days’ supply, while over at Acura, RDX stocks are up slightly from 74 to 89 days. That doesn’t mean the crossover SUV segment is hurting, as supplies continue to be tight on most compact and midsize models. Honda has just a 38-day supply of its all-new Pilot on hand.
Lynk & Co. U.S.-bound
As if the U.S. market isn’t competitive enough, an all-new brand will be launched here in 2018 with a compact crossover SUV called the 01. Lynk & Co. has been formed by Chinese automaker Geely, which also owns Volvo. The vehicles introduced by Lynk will be numbered 01, 02 and so on until the complete range is introduced.
The new vehicles will leverage Volvo’s Compact Modular Architecture (CMA) that underpins the Swedish brand’s compact vehicles. Alain Visser, senior vice president of Lynk & Co. promised “a premium state-of-the-art range of cars at the most accessible of price points…our aim is to enrich and simplify car ownership by redefining how they are bought, owned, connected, serviced and used.”
The vehicles will feature hybrid and electric powertrains, stress connectivity through infotainment and telematics systems developed by partners like Microsoft and Alibaba, and offer the ability to share the car through the use of a digital key. Lynk & Co. also promises to overhaul the buying experience by doing much of its selling on line and through company-owned stores, though whether or not they will be successful in getting around the U.S. franchise system, which Tesla has been struggling against, is an open question.
Also: Class of 2017 – New Cars Ready to Roll
Makers boost fleet sales
Growing inventories are not the only signal of a slowing market, as those manufacturers who have posted sales and share gains have done so by pumping up their fleet sales. An Automotive News analysis shows that fleet sales at Nissan are up some 40 percent, which more than offsets a modest decline in retail sales to put it ahead of last year’s numbers by some 60,000 vehicles. Fiat Chrysler Automobiles added more than 95,000 vehicles to its fleet totals this year which contributed to an overall increase of 3.6 percent. Other makes, like Ford and Hyundai-Kia had more modest increases in their fleet activity that also led to marginal gains in overall sales results.
General Motors had decided to take another tack, reducing its fleet volume. While overall sales are down, the auto giant points to higher transaction prices and larger margins from retail sales as a result of its strategy to concentrate on profits rather than sales leadership. Overall sales for GM are down 3.8 percent and while retail sales have grown by 14,200 this year, its fleet deliveries (primarily to rental companies) declined by more than 100,000 units. The company reports that 82 percent of its sales go to retail customers. By comparison, the industry leader in fleet sales is FCA at 24 percent, meaning that 76 percent are retail transactions.
On the flip side, American Honda has the highest penetration of retail sales at 98 percent, while Toyota is not far behind at 94 percent. Among imports, Hyundai-Kia sent 18 percent of its volume to fleets in September, followed by Nissan, which registered fleet deliveries of 14 percent.
More plant downtime
Another way manufacturers are looking to control growing inventories is by slowing down the pace of production. Last week, Ford announced a temporary shutdown of its Flat Rock, Michigan, assembly plant as a result of slowing Mustang sales. The company has also closed until October 24 its Louisville assembly plant which produces the Ford Escape and Lincoln MKC, as well as two plants in Mexico that build the Ford Fiesta, Ford Fusion and Lincoln MKZ.
While inventories of these vehicles are not excessive, Ford is looking to balance production with demand without having to resort to costly incentives. Right now, Ford is offering rebates of only $250 on Mustang, $750 on the Fiesta, up to $1,500 on Fusion and Lincoln MKZ, $2,000 on the Escape and $1,000 on the Lincoln MKC.
Also: Kelley Blue Book Best Buy Awards of 2016
Interest rates creep upward
The cost of financing a new vehicle continues to climb as interest rates creep upward. According to Bankrate, the average 5-year new car loan is at 4.27 percent, that’s up nearly 10 basis points since August, when the rate stood at 4.18 percent. The 4-year loan average has also seen a similar upward trend increasing to 4.24 percent from 4.15 percent over the same time period.
Three-year used car loans are now averaging 4.74 percent, up from 4.61 percent just two months ago.
The rundown
Check out the This Week in Car Buying Podcast here.
Nissan has upped the output of its base all-electric 2017 Leaf S30. In addition to greater range, the MSRP starts at $33,300.
Plug-in hybrids are coming in all shapes and sizes as the 2018 Mini Countryman Plug-In Hybrid demonstrates. It formally bows at the Los Angeles Auto Show in November.
Audi has added to its range of luxury SUVs by introducing the entry-level 2017 Audi Q7 2.0T model, which is powered by a turbocharged 2.0-liter 4-cylinder engine.
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