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U.S. light vehicle sales appear to have bottomed

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May 01, 2009 – Comments (5)

Will "cash for clunkers" ride to the rescue?

I have been bearish in the domestic auto industry for a while now, but as someone who works in the industry I am pleased to report that U.S. light vehicle sales seem to have bottomed.  Sales for the month of April fell 34.4% year over year, but sales were only down something along the lines of 4.5% versus last month and sales almost always fall April versus March.

Year-to-date, U.S. light vehicle sales are down 37%.  While I usually take anything that the "Big 3" domestic automakers say in their sales conference calls with a tremendous grain of salt, I actually agree with GM's vice president for sales Mark LeNeve when he said the following in this month's call:

"It's kind of like the anchor bouncing a long on the bottom of the lake. It has found bottom and it's tripping along a little bit. I think we have found the bottom in aggregate."

Now I have to attach a stipulation to my statement that sales have bottomed.  It is difficult to say what impact a General Motors bankruptcy or the failure of Chrysler to emerge from bankruptcy (which I believe is a lot more possible than many do at this point) would have on U.S. auto sales.  In the event of prolonged problems at these companies, which obviously are very possible, consumers might just shun vehicles from those companies and purchase vehicles from other manufacturers like Ford, the Japanese, or the Koreans.  However, I suspect that prolonged problems at these companies would have a net negative impact on sales.

On the positive side, it sounds as though it is becoming increasingly likely that the government will pass some sort of "cash for trash" program that will provide significant tax credits to people with older vehicles who purchase newer, more fuel efficient ones.  The passage of such a law would have a positive impact upon auto sales, so much so that it might even be able to temporarily counteract any lingering problems at GM and Chrysler.  It is difficult to quantify just how much of an impact "cash for clunkers" would have on U.S. auto sales, but sales increased by 40% in Germany when it passed a similar plan several months ago.

For now I am very comfortable calling 9.5 to 10 million units on an annual basis the bottom for U.S. auto sales.  I'm certainly not saying that we will see a quick recovery to the days where we sold 16 to 17 million units annually.  Those days are gone for a while.  I don't know what the new "normal" selling rate is, but it's somewhere between the "good old days" and the level that we're at right now.

Deej

5 Comments – Post Your Own

#1) On May 01, 2009 at 8:30 PM, Imperial1964 (97.92) wrote:

Thanks for the update.

I'll be the first to say that "cash for clunkers" is one of the most idiotic policies I've seen... well since...  Nevermind.  It's not much worse than anything else that come out of Washington lately.

Anyway, it doesn't make sense environmentally.  The total fuel required to produce new cars more than offsets any environmental or efficiency gains from driving a newer car. 

And how does the system not get abused by someone buying an old clunker sitting in someone's back yard, licensing it, and turning it in for a credit on a new one?  How does it not instantly make your vehicle worth substantially less because all I have to do is take a $300 car to the dealership and get $3k off a new one--with your tax money?

And what about car collectors?  I have prestine '83 Chrysler I want to be able to find parts for in the future.  Can't do that if they've all been scrapped.

We didn't subsidize housing by offering people with older, less efficient houses large sums of money to tear them down and build newer, more "efficient" homes.

I'd rather they subsidize the automakers directly like they do the banks.

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#2) On May 01, 2009 at 11:34 PM, alstry (35.09) wrote:

Deej:

For now I am very comfortable calling 9.5 to 10 million units on an annual basis the bottom for U.S. auto sales.

WSJ:

April sales totaled 819,540 cars and light trucks, a decline of 34% from a year earlier, according to market research firm Autodata Corp. The seasonally adjusted, annualized sales pace was 9.32 million vehicles, down from March's 9.86 million rate.

So much for being comfortable with a 9.5-10 million unit annualized rate only a few minutes after you became  comfortable........now let's see how low we go.......

 

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#3) On May 02, 2009 at 7:37 AM, TMFDeej (99.46) wrote:

While I shouldn't respond, Light veihcle sales should be in the 9.5 to 10 million unit range in 2009.  I wasn't talking about an annualized rate, I was talking about the real sales total for all of '09.  Anyone in the industry knows that the SAAR, which is what the WSJ was referring to is a bogus figure that uses arbitrary government modifiers to come up with an inaccurate annual selling rate for vehicles. Not only are the government SAAR factors somewhat arbitrary, but they constantly modify them after the fact.

Deej

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#4) On May 02, 2009 at 9:37 AM, alstry (35.09) wrote:

Deej,

We will see how many cars are sold when U6 unemployment grows to 20-25% by the end of summer.

The sales pace sucks air now and the layoffs are just beginning.

Get ready for a 5-6 million unit pace before this bottoms out....maybe even lower.

A couple years ago, when I predicted new home sales would drop below 500K units people thought I was nuts as sales were tracking over 1.6 million......now we are at around 350K.

Get ready for something you have never seen before....the Zombulator.....and it is zombulating the auto industry right now.

 

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#5) On April 26, 2010 at 8:01 PM, BrandonPaulChevy (< 20) wrote:

WEll indded this is the case now. A light vehicle has a poor Glow plug. And of course, big vehicles such as pick up trucks and vans are more comfortable on long trips.

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