Response to the challenge of my forecast of 9.5 to 10 million light vehicle sales in the U.S.
Recently CAPS' resident perma-bear Alsty challenged my auto sales forecast in the comments section of an unrelated post. Since auto sales don't have anything to do with credit ratings agencies, I decided to break out my response to his challenge of the U.S. light vehicle sales forecast that I made several months ago in a new post.
I know that someone making concrete predictions about an event rather than just making wild, abstract generalizations about "something" happening must be foreign to some, but I am very much sticking by my concrete prediction that U.S. light vehicle sales will come in at between 9.5 and 10 million units for all of 2009.
August was a very strong month for auto sales, coming in at 1.26 million units. Having said this, auto sales will be terrible in the United States in September. They always are when a major, relatively effective incentive program is introduced like CARS essentially was. The following chart illustrates this pull-ahead effect. Is shows the dramatic decline in sales that the U.S. experienced the month after last two huge, effective incentive programs were introduced, when General Motors introduced 0% financing after September 11th and when it introduced Employee Pricing for Everyone:
Even with the weak fall auto sales that I expect, after having sold 7.068 million light vehicles in the U.S. year-to-date through August, we only have to average 610,000 light vehicles per month over the next four months to hit the low end of my sales target.
To put that number in perspective, the two worst months for auto sales occurred earlier this year when the world was in a complete panic and the stock market collapsing. We sold only 657,000 light vehicles in the U.S. in January of 2009. January is traditionally a weak month for new vehicle sales anyhow because manufacturers usually pull forward sales in December to make their annual sales totals look better.
The second worst monthly sales total in the past two decades was February 2009 when we came in at 698,000. Immediately after those two terrible months sales rebounded in March 2009 to 858,000.
Prior to the collapse of Lehman Bros. last fall, the absolute worst sales month for autos in the U.S. in the past two decades happened in January of 1991 when we came in at 823,000 units. Even with a high level of unemployment and still reasonably tight credit any sales level below 700,000 units is unsustainably low and will not persist. I suspect that we may see a 600 print again in September as anyone who was in the market was pulled forward by Cash for Clunkers and new vehicle inventory levels are relatively low after a cutback in production followed by a surge in demand. However, it is virtually impossible that we will see four consecutive months of U.S. light vehicle sales that are less than 610,000.
My forecast is a slam dunk. Anyone care to put a wager on whether we hit 9.5 million units in 2009?