AutoNation (AN) Chief Executive Mike Jackson provided the latest evidence that demand for cars and trucks are slowing in the U.S. saying in an interview with Reuters that the operator of auto dealerships around the country is aiming to cut excessive inventory of unsold vehicles. (Related: Brexit May Slow Auto Sales)
"We still have work to do on inventory," Jackson told Reuters in an interview following on the heels of its second quarter earnings report last week. Jackson said that while inventory is at 70 days at the current rate of sales, the company is aiming to reduce that to the mid-60s days of inventory. What’s more, Jackson said the market for cars and trucks in the U.S. has reached a plateau that is forcing dealers and automakers to rethink their business after enjoying years of good growth. He said the industry has to pay a price for overproducing their vehicles and offering deep discounts and tantalizing leases to get them off the showroom floors.
The comments on the part of Jackson come amid growing signs that the auto industry in the U.S. is poised for a decline after years of strong growth. Take May auto sales for one data point. According to Autodata Corp., 1.54 million people purchased cars and light trucks in May, down 6% from that period a year earlier. Most of the automobile makers reported declines for the month with General Motors Corp. (GM) leading the way, reporting an 18% decline. That was followed by Toyota Motor Corp. (TM), which lodged a 9.6% percent slump in auto sales. Ford Motor Corp. (F) saw sales fall 6% compared to last year’s May. Volkswagen Group (VLKAY) sales fell 17%. May is usual a strong month for car makers. (Read more, here: May Auto Slump.)
Enjoying strong growth for some years now, automakers have been churning out SUVs, pickups and even sedans which is now creating a situation where everyone is stuck with excessive inventory. Low oil prices have spurred renewed interest in bigger trucks and SUVs but that has been at the expense of sedans. In June the pace of U.S. auto sales slowed compared to the year-ago June.