Americans continued to flock to sport utility vehicles, pickup trucks and Teslas in September, but they're driving away from passenger cars. Sales in September underwhelmed at General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F), while even the Japanese stalwarts Toyota Motor Corp (NYSE:TM) and Honda Motor Co Ltd (NYSE: HMC) posted swift slides.
Earlier Tuesday, Tesla Inc (NASDAQ:TSLA) bucked the trend with its stock on the rise after the electric car maker said it delivered 83,500 vehicle during the third quarter, beating Wall Street analysts' expectations and about 80% higher than all of its deliveries for 2017.
Indeed, Tesla breezed past its target of building at least 50,000 Model 3 cars in the third quarter, marking a level of production that is unparalleled for the car maker. The electric car company delivered 55,840 of its Model 3 sedans, the company said.
READ: Tesla stock revs up after it delivers 83,500 electric cars in third quarter
Meanwhile, America’s second-largest automaker, Ford, reported an 11.2% decrease in September sales compared with the same month last year with 197,404 deliveries. The carmaker said last year the recovery from Hurricane Harvey expanded sales in Houston, creating a tough comparison with this year, while Hurricane Florence cost the company business.
“September presented a tough scenario,” the automaker said in a statement.
Similarly, sales at General Motors probably slipped 14%, according to a Bloomberg News survey of nine analysts. GM no longer provides monthly sales data.
“Industrywide deliveries probably ran at an annualized pace, adjusted for seasonal trends, of 17 million in September, down more than 1 million from a year ago,” reported Bloomberg.
Fiat Chrysler Automobiles (NYSE: FCAU) posted a 15% increase in September sales compared with the same month in 2017, with 199,819 deliveries, while sales are up 6% through the first nine months of the year.
The Detroit News reported that Fiat Chrysler’s Jeep brand continues to lead the charge, posting a 14% increase in September sales on gains for the Cherokee and Compass. Jeep is up around 20% for the year.
“The Dodge brand, which is down 2% through the first nine months of 2018, posted a 41% increase in September on gains for the Journey, Challenger, Caravan and Durango,” reported the newspaper.
Not surprisingly, there was hectic trading action in the automobile sector as investors mulled the mixed bag of sales results. Fiat Chrysler stock was down 0.25% to $17.94, while shares of Ford and General Motors fell more than 1%. Toyota and Honda traded flat while, Nissan fell 0.30% to $18.53.
The Millenial Factor
Millennials have produced plenty of anxiety for automakers.
"The European/American millennial is saying they don’t want to live in the suburbs of cities anymore. They are more than happy to live in the gentrified area of Kansas City in a condo, and they don’t have a car nor do they want one — they don’t even have a drivers license, so they are never going to be the customer of Big Auto or Big Oil," energy expert Gianni Kovacevic told Proactive Investors.
Young adults mostly prefer to hail an Uber, take public transportation or even hitch a ride instead of driving; an unusually large number of young millennials haven't even bothered to get a driver's license.
"So if one aggregates any 100 of these people. Many don’t have a drivers licence, and if they do it’s for something like a car sharing service like Car2Go. They don’t want ownership, they want access. Or, they will use a service like Uber. So how does this reverberate into what we’re talking about? If we aggregate 30 or 40 of these young people, they require one car, car-sharing, or an Uber driver," said Kovacevic.
"When you look at the consumer, guess what? They all used to buy a car. No longer. These types of consumers, that count in the hundreds of millions, are never going to be the future customer of VW, GM or Toyota. If the Big 3 automakers each sell around 10 million cars a year, I will suggest to you that in the future, their car sales will stop climbing. And I believe car sales, in general, will actually start to fall."
Meanwhile, investment analyst and founder of "The Portfolio Guru" Jim Collins pointed out that higher interest rates were driving up the prices of cars, impacting sales.
"There was one fewer selling day (Sundays are excluded by convention) this September versus last, but I believe the 7% to 8% decline in US auto sales last month was indicative of an industry that is experiencing a cyclical decline. Pent-up demand has been exhausted, and the average interest rate for new car purchases, according to Edmunds, was a full percentage point higher (5.8% vs. 4.8%) in September 2018 versus September 2017," Collins told Proactive Investors.
"ALG estimated the average transaction price for a new vehicle sold in the US at $33,436 in September, up 2.3% from a year ago, and that plus higher interest rates and some pricing discipline from the Detroit Three means that affordability is becoming a factor after years of attractive deals for US car buyers," added Collins.
--Updates with additional comments
Contact Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive
-- Katie Lewis in Vancouver contributed to the article