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Chrysler growth lags industry in Q2

by Bill Cawthon on

While total sales of Chrysler brands have done well in monthly year-over-year comparisons, they came up short when comparing the first and second quarters of 2015.

Although the pace of sales growth slowed almost across the board in the April-June quarter, sales of Chrysler, Dodge, Jeep and Ram cars and trucks were up just 14.2% compared to the January-March period. Comparable Ford sales grew 17.7%; General Motors deliveries rose 20.1% and total industry results were up 15%.

Adding in the Fiat brands, the results were even worse: FCA US total sales were up just 13.8%.

Growth-Q1-Q2-2015-Web

Of all the FCA brands, only Jeep, which enjoyed a 24.7% gain from Q1 to Q2, was ahead of the industry. Ram pickup sales grew 9.5%, much better than the Ford F-series’ 1.4% but nowhere close to the 17.7% improvement in sales of the Chevy Silverado or the 23.3% jump reported for the GMC Sierra. Outside of the new Renegade and Ram ProMaster City, which were new on the market in Q1, the Wrangler came in with the largest percentage gain at 43.2%, followed by the Challenger at 31.9%.

The Chrysler 200 and Jeep Cherokee beat the industry average as did the Grand Caravan, which is a bit of a surprise. The ProMaster van also easily surpassed the industry average.

Fiat Chrysler paid more to move the metal in Q2. Based on estimates from TrueCar.com, the average incentive on each vehicle sold was up $109 or 3.4%. In March and April, Fiat Chrysler was the big spender among the major automakers: GM held the title in the other months. Fiat Chrysler’s increase was definitely not the largest: Hyundai bumped its spend 30% from Q1 to Q2; Volkswagen sweetened the pot by 13.1%. GM and Nissan also increased their spends by a larger percentage than Fiat Chrysler.

On the plus side of the ledger, Fiat Chrysler’s estimated average transaction price rose the most of any of the big players. Kelley Blue Book estimates indicate that Q2 average transaction prices were $708 or 2.1% higher over the April-June period than they were in the first three months of the year. GM’s increase was $333, a gain of 0.9% while Ford’s price actually fell, down $204 or 0.6%.

Dodge-ChallengerSXT-2015-Web

Fiat Chrysler’s average transaction price was below the industry average in Q1 but well above it in Q2. In fact, Fiat Chrysler was the only major automaker to see a steady increase in average transaction prices in all six months.

Fiat Chrysler has done well by all the standard metrics: 64 consecutive months of year-over-year sales growth; rising market share and increased profitability all say somebody is doing something right. But looking at a quarter-to-quarter comparison gives a glimpse of something that’s been happening for a long time: since 1973, to be exact. The pace of new vehicle sales is declining.

sales

In 1973, there were 6,877 new cars and trucks sold per 100,000 Americans. In 2014, that rate was 5,135, a 25% drop. The rate has dropped 16% since the record sales at the turn of the century.

Had the 1973 rate persisted, automakers would have sold over 22 million vehicles last year, nearly 5.6 million more than were actually purchased.

From 1971 to 2008, light vehicle sales growth averaged 0.9% annually. Since 2009, that growth has been exceptional averaging 9.6%: Chrysler brands sales have averaged 17.2% growth each year. Unfortunately, these rates are clearly unsustainable. Fiat Chrysler, like every other automaker, is going to have to adapt to a new normal.

Perhaps Sergio Marchionne needs to adjust his addiction from capital to sales because the competition for those is going to get fierce. And the ultimate shareholder value is staying in business.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.

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