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Today's Economic Indicator: Auto Sales are Improving aka U.S. Auto Sales Have Bottomed - Month 3

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June 30, 2009 – Comments (8) | RELATED TICKERS: F , TM

Several months ago I made the call that light vehicle sales in the United States had bottomed out, that sales for 2009 will not fall below will not go below 9.5 to 10 million units on an annual basis and that the market will very slowly recover from that level.  A vocal minority here at CAPS scoffed at my prediction, but thus far things are playing out just as I had expected.

July will mark the third time that auto sales have been released since I made this prediction.  I plan to report back on June's sales results some time tomorrow, but for now I can provide everyone with a few forecasts of what the month was like.  Industry website Edmunds.com recently stated that they believe that June will be the first month in 2009 that auto sales will come in at an annual rate of 10 million units (see article:  Forecasters see good news (by recession standards) in June auto sales).  Similarly, the consulting firm J.D. Power and Associates, which has its ear firmly on the ground with its PIN dealer sales system, recently said that they're are seeing "marked improvement" in auto sales for June.

A number of manufacturers are echoing this sentiment.  Ford Motor Company, which I wrote favorably about in this blog on March 30th when its stock was trading at $2.63/share...today it is at just under $6/share, also stated that U.S. auto sales could reach 10 million units on an annualized basis in June.

Ford's loquacious spokesperson George Pipas specifically said this about the state of the industry: "The underlying economic indicators, meaning fewer jobless claims, another month of somewhat higher levels of consumer confidence, suggest to us that the worst is behind us in terms of not only the economy ... but also that we may have seen the low point of auto sales."

In response to a bottoming in sales and increased market share, Ford announced that it is increasing production by more than 5% over the level that it announced earlier this month.  And that production plan was already the company's first year-over-year quarterly production increase in North American in two years.

Evidence of the improving market for light vehicles is evident in used vehicles as well.  The largest auctioner of used vehicles in the United States, Manheim was recently quoted as saying that the used vehicle market has shown surprising strength thus far in June (see article: Wholesale Market Shows Surprising June Strength).  The company's used vehicle price index recently hit 109.1, marking the first year-over-year gain in the index since October 2007.  The company's spokesperson, Tom Webb specifically said the following:

"The accelerated pace of wholesale price improvement in May continued in the first half of June.  The continued rise in wholesale pricing has been the result of favorable supply/demand forces, an improvement in consumer confidence and better availability of retail financing...All of those forces will continue, or strengthen, in the months ahead."

Webb also cited used-vehicle unit sales figures that showed a 7.9% increase in May after a 6.8% rise in April and a forecast of an even stronger gain in June.  Unfortunately the source of these sales figures is CNW Research and those guys are absolutely full of it.  I would not be surprised in the least if they just made up the numbers that they report out of thin air.  Needless to say, while I believe that these numbers are correct directionally I don't have a lot of faith in them.

Back to the new car side of things, Manheim's Webb believes that new vehicle sales will be around a 10 million annual rate in June.

I was optimistic that we had seen a bottom even before the Cash for Clunkers bill passed.  Yes, it's a joke but it will definitely add some sales volume in the second half of the year.  Similarly, rental car companies have started adding vehicles to their fleets again and fleet sales count as retail sales in the reported numbers.

As I have said in the past, things aren't all fluffy bunnies and roses in the industry right now.  The days of U.S. sales of 16 to 17 million units annually are long gone and it is going to take a long time for us to return to that level.  Sales do appear to have bottomed though and they have to bottom before they can slowly recover.

Deej

Related Articles:

U.S. light vehicle sales appear to have bottomed

Auto Sales Have Bottomed - Month 2

What's Bad for GM & Chrysler is Good for Ford

8 Comments – Post Your Own

#1) On June 30, 2009 at 12:43 PM, jesusfreakinco (28.91) wrote:

Let's revisit your prediction a year from now when the bottom has fallen out of the economy and unemployment is 25% higher.

You've bought into the lie of the Fed, executive branch, and the media that the 'green shoots' are more than temporary.

JFC

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#2) On June 30, 2009 at 12:56 PM, TMFDeej (99.33) wrote:

Hi JFC.  Thanks for reading.  The facts are the facts my friend.  The numbers don't lie.  I strongly believe that auto sales have bottomed.  After speaking with a myriad of people in the industry and looking at the cold hard statistics rather than just guessing and making up arbitrary unemployment projections out of thin air it was obvious to me, someone who has been in the industry for fifteen years and was uber bearish on it for a long time. 

Having said that, I'm significantly more pessimistic than the folks who keep taking about green shoots are.  As I have been saying for some time, unemployment will csorr the 10% level and it will take a long time to recover.  I think that we are at the bottom of an "L" or a "U" shaped recession.

Deej

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#3) On June 30, 2009 at 1:25 PM, ByrneShill (73.96) wrote:

Any data on the dollar volume for auto sales? 9.5 milion Yaris isn't the same as 9.5 milion Navigator.

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#4) On June 30, 2009 at 1:30 PM, russiangambit (29.27) wrote:

I think the car sales have bottomed, they are down almost 50% from pre-resession levels. And they are not going to zero, we still need cars. The question really is will carmakers be able to make profit on such low sales since they have very high fixed costs. Plus Japanese have been eating the results of dollar devaluation for years, keeping their prices in dollar steady even as dollar fell. Dollar improved a bit last year but sales fell of the cliff. I wonder what is their break-even sales volume number.

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#5) On June 30, 2009 at 1:59 PM, jesusfreakinco (28.91) wrote:

Deej,

I am curious about your thoughts on several rumors that this fall/winter will mark a serious devaluation of the USD.  I have read several warnings that we are only months away from a major change.

If this happens, all bets are off IMO.  I am starting to believe this rally has been orchestrated by the Fed to allow their large creditors a chance to divest from the USD and that the flood dams can't be held for much longer.

Thoughts?

JFC

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#6) On June 30, 2009 at 3:17 PM, alstry (35.40) wrote:

THE FACTS  ARE THE FACTS!!!!!!!!!!!!!!!!

Just before a patient dies, often after a long bout with a terminal disease....their vitals stabilize, often for a protracted period of time.  Sometimes they smile, engage in conversation, even give the appearance they are improving.....then with one deep breath, often with a look of relief, they simply go to sleep........forever.

 

Alstry has been there.....too many times.

 

The facts are the facts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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#7) On June 30, 2009 at 3:32 PM, ChannelDunlap (< 20) wrote:

JFC, these "several reports" you read wouldn't happen to come from a particular CAPS blogger, would they?  His name might start with an A and end with "lstry"?  Regardless, to answer your question, it should go without saying that anybody telling you for-sure what is going to happen months or even weeks down the line is making a prediction, of which 99.9% of are wrong.  Bear this in mind when someone tells you "This is going to happen, prepare for it." Yes, inflation/deflation/hyperinflation/etc. are all possibilities in the future.  Luckily we have a very intelligent and competent president in the White House for a change who can hopefully maneuver us around these potential problems.

As far as this rally being orchestrated by the Fed, would you happen to have any proof or evidence to support this claim?  Or is it just general governmental paranoia finally blossoming into one wholey unfounded theory?  

Deej - Thanks for the article.  I very much enjoy your blogs lately.  They're bullish-ish, but not too much.  Keep up the good work.

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#8) On June 30, 2009 at 4:05 PM, jesusfreakinco (28.91) wrote:

Channel,

I'd suggest you listen to this:












When it is admitted to at CNBS, it seems the cat is fully out of the bag.

No, Alstry isn't the only one.  Sinclair, Rogers, Schiff, the GEAB, etc.  There are credible sources.  Alstry is just quoting them.  I actually agree with Alstry and the others.  If there is smoke...

Do you really think if China was going to dump their dollars they would come out and say so?

JFC

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