DETROIT — On Tuesday, May 2, major automakers posted declines in U.S. new vehicle sales for April in a sign the long boom cycle that lifted the American auto industry to record sales last year is losing steam, sending carmaker stocks down.
The drop in sales versus April 2016 came on the heels of a disappointing March, which automakers had shrugged off as just a bad month. But two straight weak months has heightened Wall Street worries the cyclical industry is on a downward swing after a nearly uninterrupted boom since the Great Recession’s end in 2010.
Auto sales were a drag on U.S. first-quarter gross domestic product, with the economy growing at an annual rate of just 0.7 percent according to an advance estimate published by the Commerce Department last Friday.
Excluding the auto sector the GDP growth rate would have been 1.2 percent.
Industry consultant Auto data put the industry’s seasonally adjusted annualized rate of sales at 16.88 million units for April, below the average of 17.2 million units predicted by analysts polled by Reuters.
General Motors Co. shares fell 2.9 percent while Ford Motor Co. slid 4.3 percent and Fiat Chrysler Automobiles NV’s U.S.-traded shares tumbled 4.2 percent.
The U.S. auto industry faces multiple challenges. Sales are slipping and vehicle inventory levels have risen even as carmakers have hiked discounts to lure customers. A flood of used vehicles from the boom cycle are increasingly competing with new cars.
The question for automakers: How much and for how long to curtail production this summer, which will result in worker layoffs?
To bring down stocks of unsold vehicles, the Detroit automakers need to cut production and offer more discounts without creating “an incentives war,” said Mark Wakefield, head of the North American automotive practice for AlixPartners in Southfield.
“We see multiple weeks (of production) being taken out on the car side,” he said, “and some softness on the truck side.”
He said rival automakers will be watching each other to see if one is cutting prices to gain market share from another, instead of just clearing inventory.