Ford Motor Co. (ticker: F), General Motors Co. ( GM) and Fiat Chrysler Automobiles ( FCAU) all reported April U.S. sales on Tuesday, and the numbers weren’t good. The auto stocks all initially plunged between 3 and 5 percent on further evidence the auto market is on the decline.
Industry analysts are projecting U.S. auto sales to fall between 3 and 4 percent in 2017, but the April numbers from the three Detroit stalwarts were a bit more troubling. GM’s year-over-year sales declined 5.8 percent in April, Fiat Chrysler sales dropped 6.6 percent and Ford sales fell 7.2 percent.
“We have to let the year play out,” Ford vice president of U.S. marketing Mark LaNeve said in response to the disappointing April numbers. “In a plateauing industry, you’re going to have some months that are up and some that are down.”
April sales were likely negatively impacted by Easter weekend falling in April this year instead of March, but ALG, a firm that tracks industry metrics, reports Easter weekend auto sales are typically only 2 percent lower than average.
The weak April numbers are just the latest sign of what many analysts see as a cyclical decline in the U.S. auto market. Despite dealer incentives reaching their highest level since 2009, dealers are reporting new cars are taking longer to sell than at any time in the past eight years.
[Read: Why the Auto Industry Is in Trouble.]
To make matters worse, Morgan Stanley projects used car prices will fall 20 percent by 2021. In addition to the auto manufacturers, subprime auto lenders could start to feel the heat from a slumping auto market.
“We expect off-lease volumes to result in above average annual depreciation in 2017 and 2018,” Height Securities analyst Edwin Groshans said in March. “The combination of lower car auction prices and weakening credit quality will manifest in the operations of auto finance companies with subprime lending concentrations.”
[Read: Santander to Pay $25.9 Million to Resolve Subprime Auto Loan Probes.]
Height named Credit Acceptance Corp. ( CACC), Santander USA Holdings ( SC), Ally Financial Inc ( ALLY) and Capital One Financial Corp. ( COF) as the companies with the most exposure to subprime auto loans.
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More Signs the Auto Market Is Declining originally appeared on usnews.com
