Auto sales rose 5 percent in July in an uneven recovery that left Toyota Motor Co and Honda Motor Co sputtering with declines from strong results a year ago.


Ford vehicle sit in a sales lot in Scottsdale, Arizona, June 2, 2009.

The two U.S. automakers run through government-funded bankruptcies last summer, General Motors Co GM.UL and Chrysler, posted sales gains of 5 percent each.

The biggest gains came from Hyundai Motor Co, where sales rose 19 percent, and Nissan Motor Co, where sales were up 15 percent.

Ford Motor Co disappointed investors who had hoped for an outsized gain for the only U.S. automaker to have avoided a bailout. Including the Volvo brand it has now sold to China's Geely, Ford's sales were up just 3 percent, sending its shares down 1.9 percent.

The sales data, among the earliest snapshots of consumer demand for the third quarter, suggested that the U.S. economy is not slipping back into recession but left open questions about the strength of the rebound.

We're dealing with a soft economic recovery so we are certainly not seeing sales sprint ahead by any stretch of the imagination, said Paul Ballew, chief economist at U.S. insurer Nationwide in Columbus, Ohio.

July marked the eighth consecutive month that U.S. auto sales rose from year-earlier levels but also the lowest percentage growth since November 2009, when sales were flat.


Hyundai, the fastest-growing major automaker in the U.S. market, said it would substantially increase production to meet demand for strong-selling models like the new Sonata, its redesigned flagship sedan.

That will boost revenue for the current quarter and second since automakers book sales when cars are produced rather than when they are sold through dealerships.

Toyota, which had been a major beneficiary of the U.S. government's cash-for-clunkers sales incentive that began in the last week of July 2009, saw sales slip 3 percent.

It was the first sales drop for Toyota since February when it had stopped sales of popular models because of a series of safety recalls that rocked its reputation for quality in its largest market.

Sales for Honda were off 2 percent, the automaker's first sales decline since January.

All three of the major Japanese automakers boosted incentives in July. Nissan made an aggressive push on lease deals and spent more than $2,800 per vehicle on average in incentives, a record for the automaker, according to industry tracking firm Edmunds.

Overall auto sales rose 5 percent from July 2009 to just over 1 million vehicles in July, according to industry tracking firm Autodata Corp.

The still-weak auto sales results for July came as indicators for U.S. consumer spending and incomes for June were flat, data which economists said pointed toward a still-anemic recovery.

I don't see consumers come back in any big way until they feel some assurance about their personal finances, that housing prices will go up, and job markets will improve, said Edmunds Chief Executive Jeremy Anwyl.

These are major issues that are clearly dragging down car sales and I don't see any of that changing in the immediate future, he said.


GM said its results underscored the progress it has made by reducing costly sales incentives and building momentum with a more balanced line-up.

GM's sales figures could be the last monthly update from the top-selling U.S. automaker before it files for a stock offering. The IPO is expected to reduce the U.S. government's GM ownership stake of 61 percent.

Chrysler, which will announce second-quarter results next Monday, said July results showed it had weathered a stretch where it has had no new vehicles in showrooms.

Chrysler's just-launched Jeep Grand Cherokee saw a sales increase of more than 50 percent in its first month.

Now operating under the management control of Fiat SpA, Chrysler expects to launch its IPO in 2011 and will roll out 16 new or redesigned vehicles starting this month.

Ford, which gained sales momentum by avoiding the U.S. government bailouts that remade GM and Chrysler, fell short of the double-digit sales gains some analysts had expected.

The No. 2 U.S. automaker said its more modest sales gain reflected a pullback in sales to fleets, a volatile and generally less profitable category than sales to consumers.

Fleet sales, which had accounted for 36 percent of Ford's sales in the first half, were down to 25 percent of the total in July, the company said.

Ford also cautioned its results -- and the whole industry -- would face a tough comparison when sales figures for August are released in a month.

In August 2009, U.S. auto sales shot above a 14 million annualized rate because of government-funded trade-in incentives of up to $4,500 per vehicle. By comparison, the sales rate in the first half of 2010 averaged just above 11.1 million for the industry.

We are certainly optimistic about our prospects for the third quarter, said Ford's U.S. sales chief Ken Czubay.

(Reporting by Soyoung Kim, writing by Kevin Krolicki, editing by Matthew Lewis)