Car Dealer s Very first Overflow Lot in thirty seven Years Exposes U
Car Dealer’s Very first Overflow Lot in thirty seven Years Exposes U.S. Pileup
For the very first time in his thirty seven years working at Fresh Jersey car dealerships, Larry Kull had to rent extra space to store unsold fresh Honda vehicles — one of the latest signs that the record U.S. auto market is cooling.
Across dealer lots in America, inventory is piling up as automakers produce more cars than are being bought. Dealers had about eighty five days worth of cars and trucks on mitt at the beginning of February — about twenty two days more than at the beginning of two thousand seventeen and eight days more than a year earlier, according to Automotive News Data Center. 
“The sales are good, I just have more product on the ground than I’ve had before,” said Kull, who has about sixty days of passenger cars including Civic compacts and Accord sedans stocked at an office parking lot down the road from his Honda store in Marlton, Fresh Jersey. He chooses to have just forty five days worth of cars on palm.
The buildup suggests automakers will have to cut back production or boost discounts as the market’s record growth glob peters out. Analysts project automakers’ sales slowed this month to a seasonally adjusted annualized rate of 17.Five million light vehicles, according to a Bloomberg News survey, from 17.7 million a year earlier.
While automakers may not be facing a significant sales slowdown, they’ve supplied dealers as tho’ the market would keep growing following last year’s record 17.55 million annual sales. The inventory glut also is a reflection of the challenge it’s been for companies to make deep enough cuts to production of slumping passenger cars, which Americans are snubbing in favor of sport utility vehicles.
“No one likes to cut production or dial up incentives, and we’re watching a bit of both,” Thomas King, an analyst with J.D. Power, said by phone. “We’ve got a lot of cars on the ground when the market is moving away from cars.”
Among eight major automakers in the U.S., General Motors Co., Honda Motor Co. and Volkswagen AG are expected to post sales gains this month. Combined deliveries for the VW and Audi brands may build up seventeen percent, as the German automaker recovers from an emissions scandal that halted sales of diesel models a year ago.
Analysts project GM sales will rise about Two.Five percent. The largest U.S. automaker boosted discounts on its full-size trucks this month, likely supporting sales of the Chevrolet Silverado and GMC Sierra models that rival with Ford Motor Co.’s F-Series and Fiat Chrysler Automobiles NV’s Ram pickups.
Fiat Chrysler is expected to post the largest drop among the major automakers, with analysts estimating a decline of about 8.Four percent. GM spent twenty six percent more in discounts on each Silverado truck than Fiat Chrysler paid per Ram and eighty five percent more than Ford allocated for F-Series, according to J.D. Power dealer data obtained by Bloomberg News.
As GM staged a “Truck Month” promotion in February, Nissan Motor Co. advertised as much as $Five,050 off two thousand seventeen Altima sedans in some markets. Despite the discounts, Nissan sales are forecast to fall about 1.8 percent this month. Automakers marketed big incentives after it took dealers an average of seventy five days to sell a car last month, seven days longer than a year before, according to data from Kelley Blue Book.
Trimming Production
Production cutbacks also have already begun. GM and Fiat Chrysler have eliminated shifts, laid off employees or scheduled days off early this year at plants making slower selling models including the Chevrolet Cruze compacts, Chrysler Pacifica minivans and Buick Lacrosse sedans.
While powerful inventory is a signal of potential pressure on automakers’ profits, it also boosts costs for dealers, which pay interest on inventory as well as any extra expense to store vehicles.
Raj Murjani, a sales manager at a Lexus dealership in Queens, said he’s selling about forty or fifty fewer vehicles than usual this month. He sees the gap in popularity inbetween SUVs and sedans continuing to widen, as low gasoline prices encourage consumers to switch to thicker vehicles.
“If it’s a person who’s been in a sedan and they got just the slightest taste of an SUV, they don’t ever want to go back,” he said. “They think going back into a sedan is a downgrade.”
Still, even SUVs are contributing to the industry’s inventory issues. Manufacturers scrambled to meet surging request for them and overbuilt in November and December, said Jeff Schuster, an analyst with researcher LMC Automotive. Incentives on SUVs rose in January.
Kull is the president of Burns-Kull Automotive Group, which operates seven dealerships in Fresh Jersey. He leased an extra lot to store Hyundais in anticipation of fresh Genesis luxury vehicles. But it’s Honda, with its sedan-heavy mix, that’s providing him the thickest headache.
If automakers moderate production, “it should be OK,” he said.
— With assistance by Jamie Butters, Keith Naughton, and David Welch
