As the overall pace of the US car sales market continues to fall for the fifth straight month, leading auto manufacturers said on Tuesday they will continue to slash low-margin sales to car rental companies. Last year in July the pace of car and light trucks sold amounted to 17.8 million units while the current amount of cars and light trucks sold this year is only at 16.73 vehicles. Investors have started to sell their shares in the Detroit Three automakers. General Motors fell roughly 3.5 per cent and Ford Motors dropped about 2.5 per cent. Major auto manufacturers which include GM, Ford, Fiat Chrysler, Nissan and Hyundai have announced their decision to sharply reduce sales to car rental companies in July. Their decision is portrayed as putting profit ahead of sales volume. The practice of selling used low-margin sales to rental fleets has been to prevent factory shutdowns. However. with more flexible labor agreements, the Detroit automakers have altered their game plan.
They now have the option of idling factories to reduce supply and then with the properties of supply and demand, they are able to demand higher prices for their vehicles. Fiat Chrysler has already removed several models they once sold to car rental fleets. Major car rental companies in the US such as Hertz and Avis have already begun restructuring their fleets. Both companies have seen major losses over the past year. One of the main reasons has been due to the rise of ride sharing services such as Uber and Lyft, but the majority of their losses has come from the declining value of their fleets. Reselling used rental vehicles have been a practice long employed by car rental companies to recover some value out of vehicles reaching near the end of their life cycle before they are replaced by newer vehicles. Only to make matters worse for auto manufacturers, the sales of large pick ups have also declined by four per cent and large sports utility vehicles have declined by 20. GM has gained little ground in their effort to reduce their inventory of unsold vehicles. In June, the auto maker had supply for 105 days and was only able to reduce the number to 104 by the end of July. The company has promised investors to reduce supply to 70 days by the end of the year.