Auto Sales in U.S. Fall During July as Rental Fleet Sales Slashed

On Tuesday, carmakers in the U.S. said they were continuing to slash their low-margin sales to rental fleets during July as the overall sales pace for U.S. autos and light trucks fell for the fifth consecutive month.

The U.S. annualized sales pace for cars and light trucks during July fell to just over 16.72 million vehicles compared to 17.8 million for the same period one year ago, showed data released by Autodata, Corp., which tracks sales in the industry.

Investors sold off shares in the three automakers in Detroit Tuesday. Ford Motor Co. was down about 2.5%, while General Motors Co. fell by 3.5%.

Several of the big automakers, including Ford, GM, Fiat Chrysler Automobiles, Nissan Motor Co. and Hyundai Motor Co. announced they sharply reduced sales of rental cars during July, and portrayed those choices as placing profit in front of sales volume.

Carmakers have used lower-margin sales to rental fleets as a way to avoid shutdowns in plants. With labor agreements being more flexible, the automakers in Detroit have shifted away from that.

The automakers have become quicker at idling a factory to lower supply, and they demand higher prices, said an industry official. Fiat Chrysler ended production of many models it at one time sold to rental fleets.

Big rental car businesses in the U.S. like Avis Budget and Hertz are also restructuring their own fleets as their values drop for the rental vehicles they resell, and as ride-hailing services like Uber take a bite of their business.

More troubling for Detroit were the combined sales of the industry’s large pickups dropping by 4%, while sales of the large SUVs was down a dramatic 20%.

Only Ford’s F-series, which increased 6%, improved on results from one year ago amongst the major truck models.

Dropping sales could leave the big three in Detroit with an excess of factories in North America, said an industry forecaster. The drop in annual sales pace for July compared to one year ago is equal to total output for four plants.

GM did not gain much ground trying to reduce the inventories of its unsold vehicles. The carmaker had a supply of 104 days as of July 31, which was down from its end of June mark of 105 days. GM has told its investors it would reduce inventories by the end of 2017 to just 70 days.

Ford said in July that sales fell by 7.5%, but inventory was reduced from 79 days at the end of June to 77 at the end of July. Fiat Chrysler said its sales fell by 10%.