U.S. consumers, wary of rising gasoline prices and falling home values, pulled away from new-car showrooms in April, depressing new light-vehicle sales to the slowest annual pace since 1998.
The slowdown in demand for new cars and trucks marks the economic head winds Detroit's traditional Big Three auto makers face as they try to turn around their loss-plagued North American auto operations.
But the results also demonstrate the challenge the U.S. economy poses to more-successful Asia-based competitors like Toyota Motor Corp., which posted its first monthly U.S. sales decline in nearly two years. Toyota, which recently surpassed General Motors Corp. in global vehicle sales to become the world's No. 1 auto maker, had been increasing sales earlier this year even as Detroit struggled and has continued to invest in auto-making capacity in North America, the world's largest car market.
Total car and light-truck sales fell 7.6% to 1,338,603 vehicles in April, according to Autodata. That translated to a seasonally adjusted annual selling pace of 16.27 million vehicles, down from 16.69 million a year ago.
"The consumer seemed to be frozen," said Brad Bradshaw, Nissan Motor Co.'s U.S. vice president, who noted decreased traffic at his company's dealerships in April. The No. 6 U.S. auto maker's sales were off 18%.
There are a few points to make here.
1.) Let's assume that purchases of durable goods (like cars and trucks) represent a sign of confidence in the future. If this is true, then consumers may not be that confident in the next few years.
2.) I am looking at buying a car at the end of this year or the next. The first thing I do when looking at a big purchase is to read Consumer Reports. According to their reliability analysis, Japanese cars are still very dependable and US cars are still a bit spotty. This has been the trend since I was a kid and I'm 40 now.
3.) There is also the question of household debt. According to the Federal Reserve's Flow of Funds Report, total household debt outstanding totals about 130% of disposable income at the national level. There is no hard and fast rule for how much debt is too much. But I feel pretty confident in saying we're a whole lot closer to saturation than we were 5 years ago.