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TMFDeej (99.40)

February auto sales - hold on to your hats

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March 03, 2009 – Comments (8) | RELATED TICKERS: GM , TM , HMC

Well, manufacturers are scheduled to report their U.S. auto sales for February 2009 (or lack there of) today. I'm not sure what analysts' consensus estimate is for Feb. sales, but most of the articles that I have seen indicate that they are looking for sales to be around the same as they were in January.

Unfortunately, having spoken with a number of people in the industry I have a feeling that the -37% that we saw in January is a too optimistic. I suspect that there is a very good chance that auto sales were at least -45% in the U.S. last month. I have a very solid contact at a major Big 3 Japanese automaker who said that sales were off 55% at their company in Feb.

I'll let you all know how things turn out. I'm hoping for the best, but expecting the worst.

In other auto-related news, As bad as things are for auto sales in the U.S. right now, they aren't much better in Japan. Japanese auto sales experienced their largest monthly drop since 1974 in February, down 32.4% year-over-year. This represents the seventh consecutive month of year-over-year sales declines in the country. The slowdown in Japan seems to be accelerating, sales were "only" off 27.9% in January. Japanese auto sales have been on a steady decline since 1990.

Japan auto sales plunge in February

Deej

8 Comments – Post Your Own

#1) On March 03, 2009 at 6:26 AM, TMFMarlowe (< 20) wrote:

I think you're definitely in the ballpark with that -45% number... the breakdown by manufacturer and model will be particularly interesting. (Is Chrysler selling *anything* at this point? To who?)

John

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#2) On March 03, 2009 at 6:40 AM, TMFDeej (99.40) wrote:

I was speaking with someone about the disconnect between motor vehicle registrations and licensed drivers in the United States yesterday.  I told then that I saw an excellent chart that illustrated how ahead of themselves auto sales had gotten in the United States over the past several years.

I believe that there's newer information than this out there, but this is what I was able to find for right now.  The following chart contains data from the U.S. Dempartment of Transportation through 2006.  The trend would be even more pronounced if the chart had contained data from 2007.  As you can see, the number of registerd vehicles has risen significantly faster than the number of drivers on the road over the past decade.

This means that during the time that the credig and housing bubble were inflating, consumers were buying "extra" vehicles like work trucks, or fun roadsters to use on the weekend, etc...  Heck, I know several people who have at least four cars (this is skewed somewhat because I am in the industry).  Does anyone think that people are going to be as anxious to buy extra vehicles now that the econonmy is a wreck?  I don't.

This means that we will likely see the registration and driver trend lines begin to converge.  People keep talking about scrap rates, how long it will take to replace the vehicles that are on the road, etc...but with people no longer purchasing extra vehicles, people in cities deciding that they no longer need new vehicles, unemployed vehicles putting fewer miles on their vehicles and unable to afford new ones, the recent spike in the selling rate of used vehicles, that new vehicle sales can remain at an abnormally low level for much longer than many people think.

Deej

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#3) On March 03, 2009 at 6:59 AM, TMFMarlowe (< 20) wrote:

That's a good observation re 3rd cars. I've suspected as much (and might even have written about it for the Fool), but I've never collected data on it. In the 1990-1991 recession one could buy a lightly-used Porsche 944 for very light money; I suspect this will be a similar era for Boxsters and the like.

On a related note, I suspect that BMW/Lexus/MB/etc US sales will significantly lag mainline brands when the recovery comes -- they are to cars what Toll Bros is to housing, the aspirational brands that many of their buyers couldn't properly afford, and their sales levels were frankly unsustainable in a way that Ford/Honda/Toyota/etc weren't.

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#4) On March 03, 2009 at 9:17 AM, Rehydrogenated (32.48) wrote:

Yeah great chart, you should make a blog for that if you havent already

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#5) On March 03, 2009 at 10:09 AM, rofgile (99.29) wrote:

You are making the statement that based up this chart, which shows that there has been a rise in car buying through the 1990's ahead of the rise in population and the new drivers, that there is a car bubble.

I think the situation is different.  In the 90's when many families were doing well, they got extra cars not just for both parents, but also kept a car or bought a car for teenage kids.  Unlike houses, one family can own and make use of multiple cars.  If the economy is tough, they might have to wait on buying cars, but if it does well they can buy extra.  That doesn't mean that now that times are bad, these cars will sell off and there could be a "car glut" like there is in housing.

Cars also wear out quicker than houses do.  Cars also have changing styles, changing fuel efficiency, etc which means that people prefer to get newer vehicles.

Anyways, what I am arguing is that even if more cars have been bought per family when times are good - that does not have the same predictive information as seeing house prices rise much above salaries.

An interesting question would be - what has been the change in the ratio of automobile price versus salaries? 

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#6) On March 03, 2009 at 2:05 PM, TMFMarlowe (< 20) wrote:

TMFDeej, looks like you nailed it pretty well. And looks like GM's fleet business got *hammered*.

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#7) On March 03, 2009 at 4:00 PM, TMFDeej (99.40) wrote:

Thanks for reading and for the comments everyone.  Yep, Marlowe just about everyone was crushed.  In fact, I'm somewhat skeptical of a couple of the numbers from the Japanese that I expected to be worse. 

Of note, Chrysler would have been down 50%+ again had it not spent nearly twice as much on incentives as any other manufacturer in a feeble attempt to pump up its sales numbers prior to the March 31st government deadline for it to prove that it is a viable company.

For those who are interested, U.S. auto sales fell 41% in February.  Here are the numbers for a few of the key players:

GM -53%
Ford -49%
Chrysler -44%
Toyota -40%
Honda -38%
Nissan -37%
Volkswagen -20%
BMW -35%

Deej

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#8) On September 14, 2009 at 9:03 PM, BrandonPaulChevy (< 20) wrote:

Well, it is really unfortunate for the auto industry. Especially now that most car manufacturers are falling into bankruptcy. This is the fear of Jeep that is why they are modifying their jeep wrangler parts in order for them to build a cheaper car.

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