May auto sales can't quite reverse 2017's slide

Last Updated Jun 1, 2017 5:00 PM EDT

DETROIT -  U.S. auto sales fell for the fifth straight month in May, bolstering expectations for the industry's first annual sales decline since 2009. 

Some analysts lowered predictions for the year as General Motors (GM), Fiat Chrysler (FCAU), Hyundai and Toyota (TM) all reported May decreases compared with a year ago. Ford (F), Honda (HMC), Nissan (NSANY) and Volkswagen (VLKAY) said their sales were up. The figures added up to just over 1.5 million vehicles sold and a 0.9 percent decrease for the month. 

Ford even beat General Motors, a rare feat that has happened only one other month since 2002.

Tom Libby, an industry analyst with IHS Markit, said although economic fundamentals such as unemployment, consumer confidence, gas prices and interest rates all look good, sales still will fall this year because pent-up demand for new cars has been satisfied and many people have decided to keep their automobiles longer.

The industry posted annual sales jumps from 2010 through 2016, a streak matched only in the 1920s, Libby said. Sales hit records of around 17.5 million the past two years, so most people who needed a new car bought one, he said. "It's very understandable that this would not continue," said Libby, whose firm reduced its full-year sales forecast for 2017 from 17.4 million units to 17.3 million.

Added IHS Markit's Stephanie Brinley: "Sales in May seem to continue trends of earlier months, with cars generally performing worse and trucks and SUVs stronger. Automakers with older car lines seem to be seeing more difficulty on the car side, as well."

LMC Automotive and J.D. Power lowered their forecast to 17.2 million units from 17.5 million.

The average age of a vehicle on U.S. roads has inched up to about 11.5 years, and people are keeping cars and trucks longer due to higher quality and reliability from all automakers, further slowing sales, Libby said.

For the month, Ford reported a surprising 2 percent increase, while Nissan said its sales rose 3 percent. Honda sales were up just under 1 percent. Volkswagen sales rose 4 percent over weak numbers last year due to its diesel emissions cheating scandal.

But GM sales fell 1 percent from a year ago as strong crossover SUV sales were offset by a 36 percent cut in sales to rental car companies. Toyota fell 0.5 percent, and Fiat Chrysler dropped about 1 percent.

Ford's increase was fueled by an 8 percent jump in fleet sales and a strong month for the F-Series pickup truck with sales up nearly 13 percent to over 76,000. The No. 2 U.S. automaker sold 241,000 vehicles to beat GM, which moved just over 237,000 vehicles.

When major automakers finish reporting sales on Thursday, analysts expect a small gain in May after falling 2.4 percent from January through April.

The shift from cars to trucks and SUVs of all sizes continued, with analysts expecting car sales to decline to around 38 percent of the market in May.

Deals should be abundant because of an oversupply of cars, Libby said, as automakers do everything they can to cash in on the boom in SUVs and car-based crossover utilities. "The manufacturers frankly are flooding the market with crossovers, two and three in the same segment from the same brand," he said.

May had plenty of deals, especially during the Memorial Day holiday weekend. Incentives such as rebates and low-interest financing were expected to rise about 7 percent to $3,583 per vehicle, a record for the month of May, J.D. Power said.

Dierdre Borrego, senior vice president of automotive analytics at J.D. Power, said the big incentives mean automakers are grappling with growing inventories. The average amount of time a vehicle sits on a dealer lot was 71 days in May, the first time it was above 70 days since 2009, according to J.D. Power.

Ford said its inventory dropped from an 83-day supply of new vehicles in April to 72 days in May. GM's inventory grew by one day to 101. A 60-day supply is considered optimal for automakers.

High inventories could lead to more deals but also layoffs at auto assembly plants as companies try to cut production.