Trucks Rule as U.S. Vehicle Sales Keep Rolling in May

Surging consumer confidence continued to lure buyers into dealer showrooms in May. When all is said and done, U.S. auto sales likely will have rebounded back from April’s slight decline to an annualized rate of 15 million vehicles, a sign that automakers’ fortunes are continuing to recover — at least for now.

But sales volume was not the only trend to emerge from May U.S. sales data — the mix of vehicles was also revealing. Full-size pickups, fueled by the boom in new housing construction, drove gains at the Detroit 3 automakers General Motors (GM), Ford (F) and Fiat SpA’s (FIATY) Chrysler.

Here’s the breakdown:

GM: Although GM sold 252,894 vehicles in May — its best sales month since September 2008 — year-over-year sales growth was a relatively subdued 3%, missing analysts’ forecast of a 6% gain. A 10% drop in fleet sales offset the 9% retail sales increase. Overall, GM’s truck sales gained 12% compared to May 2012, including a 23% increase for large SUVs and a 22% boost on large pickups. GM’s Chevy Silverado pickup was a big winner with a 25% sales gain in May over the year-ago month.

GM’s biggest winner last month, however, was its Cadillac luxury brand, which zoomed 40% compared to May 2012. Not only is Cadillac’s sales increase its best year-over-year gain since 2007, but the brand is up 28.6% year-to-date — its biggest such increase since 1976. GM’s redesigned midsize crossovers — Chevy Traverse, GMC Acadia and Buick Enclave  — also posted double-digit sales gains in May.

Ford: Ford sold about 246,600 vehicles in May, an increase of 14% over last year. Trucks gained 18%, SUVs were up 15% and passenger cars gained 9%. Not surprisingly, the brightest star in Ford’s constellation of winning models was the F-Series pickup, which zoomed up 31% over last year, delivering its strongest monthly sales performance since 2007.

Fuel-efficient vehicles also posted sales gains last month, as sales of the Escape compact crossover grew 26% and the Fusion continued its pedal-to-the-metal performance gaining 10% in May. Fusion has been Ford’s second-strongest model after the F-Series pickup so far this year. Although Ford’s Lincoln luxury brand continues to struggle, the new MKZ sedan is gaining traction: Sales of the model rose 42% in May.

Chrysler: Chrysler continued to do a lot of things right in May, as sales jumped 11% to deliver its best May since 2007. Chrysler sold a total of 166,596 vehicles during the month. Trucks and utilities were the big winners for the automaker in May, with the Ram Truck and Dodge Durango SUV leading the pack with gains of 24%.

Although the Jeep brand overall was up only 1%, some models continued to turn in strong performance — the Wrangler and Compass SUVs posted record sales; the Jeep Compass and Grand Cherokee were up 42% and 24%, respectively.

The Dodge brand was strong in May, posting a 23% gain, its best May numbers since 2007 and the 24th consecutive month of sales gains. Leading the pack were the Dodge Avenger mid-size sedan and the Dodge Challenger revived muscle car, which set sales records during the month.

Toyota (TM): Toyota continued to drive back from the string of woes that has plagued the automaker since the rash of recalls dented its reputation and natural disasters in Japan put the brakes on production. TM sold 207,952 vehicles in May, a 2.5% increase over May 2012, but a whopping 18% above its April sales total.

Sales gains in the Prius family of hybrids were expected, although TM delayed its full May sales breakdown until after our deadline. Toyota shares were down about 3% by midday Monday.

Nissan (NSANY): Price cuts were the key to Nissan delivering best-ever sales totals in May. The automaker sold more than 114,000 vehicles in May, an increase of 25% over the same month last year. The increase was fueled by strong sales of the Pathfinder SUV — which gained an insane 293% — and the Altima mid-size sedan, which was up 40%.

Nissan’s competitive strategy last month focused on cutting prices on seven popular models, a play aimed at grabbing market share from its rivals. Since Nissan also reduced incentives on vehicles by more than a third last month, however, the company did not sacrifice margins for the sake of boosting volume.

Bottom Line

The latest vehicle sales data is a mixed bag for investors in auto stocks. On the one hand, strong vehicle sales are a traditional bellwether for the economy at large — and they appear to be saying happy days are here again. That’s backed up by a Thomson-Reuters consumer sentiment index that’s at its highest level since July 2007. But that report reveals a double-edged sword — personal income isn’t rising with that optimism, and consumers are starting to cut back on spending. That’s a concern for auto stocks in the second half of the year.

The housing boom — and rapid appreciation in housing prices — is helping drive auto sales growth in two ways: People feel richer (and are more willing to satisfy that pent-up demand with luxury models) and new-home starts are fueling sales of full-size pickups that can be used on the job.

Auto stocks are on a tear this year, with F, GM and FIATY up an average of 80% so far this year. While I expect unbridled consumer optimism to collide with reality later this year, Ford and GM in particular still have compelling, single-digit forward P/Es and PEG ratios under 1, indicating that they may still be slightly undervalued. Both automakers also have strong models and aggressive cost management in place — factors that will help the stocks roll through any brief storms without getting stuck in the mud.

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.

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