U.S. auto sales receding: Cars ailing, crossovers booming

Sputtering car sales are finally backing up the auto industry.

Fueled almost entirely by plunging sales of small cars and sedans, a steady decline in U.S. auto sales in the first half of 2017 promises to end the auto industry's two-year streak of record sales.

Barring a sudden, unexpected surge in the second half, the industry will back up slightly from 2016's all-time record of 17.6 million units sold.

“Clearly we have an industry that has peaked," said Mark LaNeve, Ford's vice president of sales. But it's still "a very good industry. I will take it all day long."

Auto sales fell 2.1% through the first six months of 2017, compared to the same period in 2016, according to Autodata. June sales reported Monday fell 3% from a year earlier, as consumers continued to abandon compact cars and mid-size sedans in favor of crossovers, sport-utility vehicles and pickup trucks.

Analysts at Edmunds.com and Kelley Blue Book had projected industry sales declines of 2.3% and 3.6%, respectively.

"June sales numbers reaffirm that we are in what we’re calling a post-peak phase," Autotrader.com analyst Michelle Krebs said.

Kelley Blue Book analyst Alec Gutierrez said sales could end up in the vicinity of 17.1 million units for 2017.

An uptick in dealer incentives — including the longest-term loans in the industry's history, according to Edmunds.com — wasn't enough to fuel an increase in the first half. Average discounts accounted for 10.2% of average prices so far in 2017, compared to 9.8% in 2016, according to Kelley Blue Book. But the automakers are still remaining disciplined by not splashing incentives on all vehicles, Krebs said.

Still, at the current sales pace, automakers are reaping healthy profits as consumers remain confident and gas prices remain low. Prices averaged $2.24 per gallon on Monday morning, according to GasBuddy, in one factor contributing to the shift from cars into larger vehicles. Design preferences are also contributing, according to industry research, as many baby boomers prefer crossovers for their high-riding stature and Millennials prefer the extra space for their growing families.

Mid-size cars lost 2.2 percentage points in market share in the first half of the year, falling to 10.9%, according to Kelley Blue Book. Meanwhile, mid-size SUVs and crossovers gained 1.4 percentage points in market share, rising to 12.8%.

Although automakers that have bet heavily on cars are suffering losses in that area, the transition to more profitable SUVs and crossovers eases the pain.

“We still believe that 2017 will be another solid year,” Toyota sales chief Bill Fay said.

The trio of automakers traditionally known as the Detroit Three each posted sales declines for first half of 2017. General Motors was down 1.8%, Ford fell 3.8% and Fiat Chrysler declined 6.9%, according to Autodata.

In the first six months of the year, Toyota sales fell 3.6%, Honda fell 0.1% and Nissan rose 2.7%. Red-hot Subaru continued to snap up market share from its competitors, as sales rose 9.1%.

German automaker Volkswagen Group continued its recovery in the U.S. market following the devastating emissions scandal that wrecked its sales in 2015 and 2016. VW's namesake brand recorded an 8.2% sales increase through June, aided by the recent introduction of the Atlas SUV.

Korean automaker Hyundai, relying heavily on cars and fleet sales, recorded a 7.4% decline during the period. Sister brand Kia's sales fell 9.9%.

For the automakers, the key question is whether they will have to dramatically reduce car production and move resources to make more SUVs and crossovers.

"We’ve been working on that for the better part of the last year or two as the consumer demand for light trucks has shifted our need to build more light trucks and rebalance our car mix,” Toyota's Fa said. “That’s an ongoing dynamic that will continue through the remainder of 2017 into 2018.”

One challenge for the auto industry is that a flood of vehicles that were leased in 2014 are suddenly hitting the used market, undermining the outlook for new cars.

"Nerves are being tested," Jeff Schuster, senior vice president of forecasting at LMC Automotive, said in a report. "It will be challenging in the second half of the year to keep pace with 2016, so some additional weakness and further risk are expected in both fleet and retail volume, but a year still expected above 17 million units should not be considered a poor performance."

Contributing: Detroit Free Press reporter Brent Snavely

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Here's how the major automakers fared in June (all figures compared to June 2016):

General Motors

Edmunds.com projection: -1.8%

Kelley Blue Book projection: -1.3%

Actual results: -4.7%

GM sold 243,155 vehicles in June, regaining the industry lead after one month of slipping behind rival Ford.

But sales of Chevrolet, GMC and Cadillac were down 6.4%, 3.6% and 11.8%, respectively. Only the Buick brand rose, with an increase of 16.4%.

The company said its retail sales fell 3% for the month.

Big performers included crossovers such as the Chevrolet Equinox, Chevy Traverse and Buick Envision.

Ford Motor

Edmunds.com projection: -5.5%

Kelley Blue Book projection: -9.7%

Actual results: -5.1%

The Dearborn, Mich.-based automaker sold 227,979 vehicles in June. Retail sales were flat, but sales to fleet customers decliend 13.9%.

The company enjoyed a 3.2% increase in sales of SUVs and crossovers and a 1.2% increase in trucks, but car sales plummeted 23%, reflecting the general industry trend.

Ford's namesake brand fell 5.4%, while its luxury Lincoln lineup continued its hot streak with a 5.3% increase.

Fiat Chrysler Automobiles

Edmunds.com projection: -10%

Kelley Blue Book projection: -7.6%

Actual results: -7.4%

Fiat Chrysler sold 187,348 vehicles for the month. The company's retail sales declined 5%. The automaker is rapidly reducing its previously heavy reliance on less-profitable fleet sales, which declined 15%.

Overall, Jeep sales fell 10.5%, Chrysler sales were down 15.2%, Dodge slipped 13.7%, Ram fell 6.5% and Fiat declined 3.7%.

Toyota

Edmunds.com projection: 0.1%

Kelley Blue Book projection: 0.9%

Actual results: 2.1%

The Japanese automaker exceeded expectations for the month, selling 202,376 vehicles. That included a 3.2% increase for the namesake Toyota brand and a 5.4% decrease for the luxury Lexus brand.

The company's car sales plunged 11.5% for the month. But sales of crossovers, SUVs and pickup trucks boomed 15%.

That included a 24.7% increase for the RAV4 SUV, which replaced the Camry sedan as Toyota's most popular vehicle for the month and the first half of the year. Camry was down 9.5% for the month.

Toyota is also getting a boost from its new small crossover, the C-HR, with 3,100 units selling in June.

Honda

Edmunds.com projection: 1.4%

Kelley Blue Book projection: -2.7%

Actual results: 0.8%

The Japanese automaker's namesake Honda brand declined 1.3%, as its small cars struggled and the CR-V crossover underperformed due to what Honda called "low supply of higher trim" models.

But strong sales of the HR-V and Ridgeline balanced out the month for the Honda brand, which sold 139,793 units.

Meanwhile, the company's Acura luxury brand posted a sales increase of 23.7% to 14,038.

Nissan

Edmunds.com projection: -4.1%

Kelley Blue Book projection: -1.1%

Actual results: 2%

The Japanese automaker posted surprisingly strong sales for the month, with a total of 143,328 units.

The Nissan brand was up 1.2%, and the luxury Infiniti brand increased 11%.

The Nissan Rogue crossover, which is staking a claim for the crown as hottest vehicle in the industry, continued its meteoric streak with a 17.4% sales increase to 34,349 units.

Hyundai-Kia

Edmunds.com projection: -4.1%

Kelley Blue Book projection: -0.8%

Actual results: Hyundai brand sales fell 19.3% The brand said its retail sales rose 1%, meaning a massive reduction in fleet sales accounted for the contraction.

Meanwhile, sister brand Kia posted a decline of 10.3%.

Volkswagen Group

Edmunds.com projection (VW and Audi brands): 13%

Kelley Blue Book projection (VW, Audi and Porsche brands): 9.1%

Actual results: The company's VW brand recorded a 15% sales increase to 27,377 units, aided in large part by sales of the brand new Atlas SUV. The company sold 2,413 Atlas vehicles for the month.

The company's Audi luxury brand posted a 5.3% increase to 19,416 vehicles.

Subaru

Edmunds.com projection: (none)

Kelley Blue Book projection: 7.3%

Actual results: The red-hot brand's sales streak continued, rising 11.7% to 52,057 units.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.