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Home » Technology » Ford and Nissan Feed Rental-Car Fleets as Consumer Demand Sags

Ford and Nissan Feed Rental-Car Fleets as Consumer Demand Sags

Car Demand
April 10, 2019
Bloomberg

Stronger-than-expected new-car sales last month belied a dirty little secret: Automakers have been selling more vehicles to rental fleets in recent months to prop up volume.

Deliveries to rental-car companies and other non-retail buyers accounted for more than a third of total sales last month for Ford Motor Co. and Nissan Motor Co., according to data from researcher Cox Automotive. Deliveries to rental companies alone in March and in the first quarter were the highest in two years.

Rental-car sales tend to have lower profit margins and can erode used-vehicle prices once those models hit the resale market. Automakers appear to be using fleet deliveries to make up for showroom demand starting to sputter as U.S. economic growth slows.

“Any favorable view we have of the market is because of sales into fleets,” said Zohaib Rahim, manager of economics and industry insights at Cox. “The market peak of 2016 is behind us and retail sales are softening more and more now.”

Automakers sold 550,000 vehicles to rental-car companies in the first quarter. That’s the most since the first quarter of 2016 and up 6 percent so far this year, Rahim said. The increase comes on top of a 7 percent gain in 2018 to 2.7 million.

The surge helps explain the surprising resilience of the auto market. Sales have been down every month this year, but the annualized selling rate improved to 17.45 million in March, helped by favorable seasonal factor adjustments.

Ford was especially reliant on fleets in March, with these deliveries accounting for 39 percent of sales, including 19 percent from rental-car companies, according to Cox data. The automaker is discontinuing car models including the Focus compact that used to be significant volume contributors.

Mark LaNeve, Ford’s U.S. sales chief, said the first-quarter jump in fleet deliveries was dictated by the timing of orders from rental companies. He expects these sales to smooth out over the course of the year.

“Our plans are to end 2019 down slightly in the rental channel,” he told analysts on a recent conference call. “The retail performance was strong where it needed to be, in trucks and new SUVs.”

Nissan’s total fleet share was 36 percent. Most of that volume went to rental lots, the data showed. A Nissan spokesman said the company doesn’t break out its monthly sales.

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