DETROIT – Auto sales to individual U.S. consumers beat expectations in July and major automakers reported low inventories for many hot-selling models, such as Ford Motor Co's Fusion mid-size sedan, suggesting that sales would strengthen further this year.
Shares of General Motors Co and Ford rose Thursday after analysts and executives disclosed their so-called retail sales, which are considerably more lucrative than fleet sales to rental car agencies, governments and companies.
This overshadowed the fact that overall sales were weaker-than-expected. Analysts said results were undercut by disappointing fleet sales to governments and businesses, and overly optimistic Wall Street expectations after a strong June.
"The industry appears to be tightly supplied, which is just good for pricing and future production and so that's helping to offset the headline (annual sales rate) disappointment," Morgan Stanley analyst Adam Jonas said.
Reports indicate that the U.S. annual auto sales rate in July will fall below the expected 15.8 million rate. Jonas said July's sales pace was on track to be around 15.5 million.
This fall, Ford will boost production capacity of its Fusion midsize sedan, which saw a 12 percent drop in sales last month. The Fusion is currently running at a 40 day supply but in some regions, supply is closer to 30 days including cars not yet on dealer lots.
PICKUPS STILL STRONG
GM, Ford and Chrysler Group LLC also reported continued strong demand in July for pickup trucks like the Ford F-150, Chevrolet Silverado and Ram 1500 amid busier times in the housing and oil industries.
In July, sales of Chrysler's Ram truck gained 31 percent, Ford's F-Series were up 22.6 percent and those for GM's trucks rose 44 percent.
Overall U.S. auto sales will likely grow during the rest of the year as automakers roll out their new 2014 lineup, which feature more technological advances than in years past, Jonas said.
For example, the upcoming Acura MDX costs $1,700 more, but has $4,000 more in new equipment and features.
"People who are looking to buy a car are thinking, 'This changeover is more substantial than we typically get. I want to wait,'" Jonas said. "It bodes very well for the second half."
(For a U.S. auto sales graphic, click on http://link.reuters.com/kad22v)
'A GOOD PROBLEM TO HAVE'
Strong demand for pickups is particularly good news for U.S. automakers, which dominate that sector and generate profits of $12,000 or more per vehicle.
Chrysler launched a new version of its Ram pickup last fall, while GM started selling its redesigned Chevrolet Silverado and GMC Sierra trucks in June.
Most of GM's pickup sales during the month were for its older models, but the largest U.S. automaker still managed to gain market share and boost prices. That speaks to a broader appetite for trucks, analysts said.
"When you see pickup truck sales as strong as they were, that's certainly bodes well for the automakers and suppliers given the content in those vehicles," said Brian Sponheimer, analyst with Gabelli & Co.
"Calling the month a miss when sales look up double digits is a good problem to have," he said.
GM sold 234,071 cars and trucks in July, up 16 percent from a year ago. Ford, the No. 2 U.S. automaker, said its U.S. sales last month totaled 193,715 vehicles, up 11 percent. Chrysler, a unit of Italy's Fiat SpA , sold 140,102 vehicles, which was an 11 percent increase.
In July, both GM and Ford reported weaker-than-expected fleet sales, analysts said.
"Occasionally, you get these types of months where fleet does something a little wacky and it tends to sway the overall sales rate," Citi analyst Itay Michaeli said.
'OVER-EXUBERANT' AFTER JUNE
Analysts also warned that soon-to-be released U.S. data on seasonality could shift the auto sales rate by a few tenths of a percentage point in either direction.
Still, July outpaced the overall industry's U.S. sales gains during the first half of the year -- even when factoring in the June sales rate of almost 16 million.
GM and Ford shares were both up 1.7 percent on the New York Stock Exchange. The broader S&P 500 was up 1 percent in early afternoon trading.
"We saw what happened in June, we expected to see that pace continue and while the market's still trending at a double-digit growth rate, perhaps everyone got a little bit over-exuberant after June's strong performance," said Alec Gutierrez, senior analyst with Kelley Blue Book.
Toyota Motor Corp <7203.T> said U.S. auto sales in July were up 17 percent to 193,394. If heavy trucks are subtracted from Ford's results, July marks the first month since March 2010 that Toyota sold more light vehicles than Ford.
U.S. auto sales have long been a bright spot in the U.S. economy, but there are signs that the overall market is gaining traction. U.S. data released on Thursday indicated that growth could accelerate in the second half of the year.
(Reporting by Paul Lienert and Ben Klayman in Detroit; Editing by John Wallace and Chris Reese)