Category: News Type

Auto dealers see slowing sales, sparking fears that a long-expected decline is here

Suzanne Kreiter | The Boston Globe | Getty Images
Keith Monnin, CEO of Bernardi Auto Group, looks over a dealership in Framingham, MA.

A growing number of auto dealers around the country is seeing a noticeable drop in retail sales and customer traffic in showrooms, raising the possibility that a long-anticipated slowdown in auto sales has arrived.

“We are definitely seeing business pull back,” said Scott Adams, the owner of a Toyota dealership in Lee's Summit, Missouri, just outside Kansas City. “September was off some, but this month our car sales are down 12 percent and our truck sales are down 23 percent.”

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Other dealers tell CNBC they saw a significant drop in sales last weekend. One dealer in metro Tampa Bay, Florida, who asked not to be identified, said sales this month are down 13 percent.

“Customer traffic has moderated,” said Mark Scarpelli, president of Raymond Chevrolet and Kia in Antioch, Illinois.

Scarpelli said sales at his dealership are “keeping pace” with last October, but he has seen customers taking longer before buying a new car or truck. “There is a little bit more of a pause because of the higher interest rates,” he said.

Auto loan interest rates have moved steadily higher as the Federal Reserve has raised rates this year. In the second quarter of this year, the average new vehicle interest rate was 5.76 percent, up from 5.2 percent at the same time in 2017, according to Experian, which tracks millions of auto loans.

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Gary Barbera, who sells Jeep, Ram, Dodge and Chrysler models in Philadelphia, said his sales team has to “dig a little deeper” to close a sale. Still, business is up more than 6 percent this month, he said.

The pace of auto sales for October is expected to be close to 17 million vehicles, according to the auto website Edmunds.

Jeremy Acevedo, Edmunds' manager of industry analysis, said the number might not be showing signs of weakness due to auto fleet sales. If automakers increase fleet sales to corporations and government agencies, it would offset weaker retail sales through dealerships.

For more than a year, analysts have said auto sales are primed to slow down for a variety of reasons, including a surge in 3-year-old models entering the used car market. That wave of pre-owned models with relatively low mileage gives potential buyers an attractive option at a far lower price. Still, auto sales have remained robust and are on pace to top 17 million vehicles for a fourth-straight year, which would be a record for the industry.

Dave Fischer, chairman and CEO of the Suburban Collection, which has more than 50 retail stores in Michigan, California and Florida, said if sales slowing around the country, he's not seeing it.

“We will be up over last year. People are still buying,” he said.

—CNBC's Meghan Reeder contributed to this report.

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GM EV1 exec leaves Faraday Future

Faraday Future completes first pre-production FF91 on August 28, 2018
In the midst of the latest round of financial turmoil at the company, Faraday Future has lost a key executive, according to a report in the Verge.

Peter Savagian was senior vice president at Faraday Future. And he was the chief engineer of General Motors' EV1, arguably the first mass-produced modern electric car.

One anonymous source inside Faraday Future told the Verge, “He was the guy” (emphasis original) at Faraday Future. Another called him “the backbone of the company.”

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Savagian appeared in a video last month leading company employees in showing off Faraday's first product, the FF91 electric luxury sedan when the first prototype rolled off its new assembly line in California.

Shortly after that event, the company started laying off workers earlier this month and cut the pay of remaining workers by 20 percent after its latest financing deal fell on hard times.

Artist’s impression of Faraday Future’s proposed plant in Hanford, California

The company has a history of financial troubles, as one investor after another has backed out.

Most recently, the company received a commitment of $2 billion in June from Hong Kong conglomerate Evergrande Health, with an $800 million bundle of cash up front. Faraday ran through the first $800 quickly by setting up a production line and building its first prototypes, and Evergrande balked at providing promised followup funding.

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Faraday filed an arbitration case against Evergrande in early October when it announced the layoffs. Last Friday, a Hong Kong arbitrator found in favor of Faraday Future, ruling that the company can seek funding from other investors, a move which Evergrande had worked to prevent.

The company isn't out of the woods, but the arbitration ruling gives a glimmer of light in the tunnel.

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Three other former members of GM's EV1 team reportedly still work at the company.

If it makes it to production, the FF91 is expected to be a $300,000 electric competitor to ultra-luxury sedans such as the Rolls Royce Phantom. A less expensive followup model, the FF81 is also on the drawing boards.

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