June Sales Forecast: Swing Low, Sweet SAAR-iot
The US market’s Seasonally Adjusted Annual Selling Rate (SAAR) hurdled the 12m mark towards the end of last year, and was cruising above the 13m mark for much of the first half of 2011, but after a rough May, June seems set to become the market’s second month back under the 12m mark.
Not every analyst agrees with Edmunds’ sub-12m SAAR projection, with some forecasting [via Bloomberg] as high as 12.2m and others guessing as low as 11.8m, but one thing is certain: everyone thinks Detroit will pick up sales compared to their June 2010 numbers, with GM’s pickup predicted to be in the 14-20% range, Chrysler in the 20-30% range and Ford in the 8-15% range. The big losers: Honda and Toyota, both of which are expected to lose sales compared to last June.
Toyota says inventories “bottomed out” in June, and all three of the major Japanese automakers increased incentives noticeably in a play to keep customers, although GM and Chrysler still top TrueCar’s incentive forecast. And, according to Barclays Capital analyst Brian Johnson, low inventory might not be as big of a problem as strong pricing:
Light-vehicle sales ticked up only slightly in June as many potential buyers continued to defer their purchase amid high car prices and limited inventories. Despite some indication last month that Japanese (automakers) were ready to cut prices as post-quake production resumed, pricing has remained strong in June, likely leading many buyers to defer purchases.
The solution then might seem obvious: lower prices. But some fear that something else is playing out in the falling sales. Reuters reports that
Auto sales, to be reported on Friday, are an early indicator of consumer spending each month… some economists, including Peter Morici at the University of Maryland, see signs that a second recession may be “in the wings”
Not so, says Ford economist George Pipas, who tells Bloomberg
Industrywide sales have been hurt by “the lack of availability of some popular products in May, June and probably July” because of the March 11 earthquake and tsunami in Japan, Pipas said. “When they come back on line, we’ll do as well as we did in the first four months of the year, plus we’ll have pent-up demand from people who have been deferring purchases”… The “underlying demand” is for a 13 million sales rate, Pipas said. “The economy is expanding, income is expanding, the population is growing and cars are getting older… The likelihood of a double dip is not even on our radar screen”.
But even if the overall market recovers from what Ford and Pipas see as a two-month dip, GM is exhibiting symptoms of another, potentially troubling, industry trend: strong cars sales. Wait, I mean weak truck sales. Reuters reports that Chevrolet’s car sales made up the majority of the brand’s volume for the third month in a row, the first time the bowtie brand has achieved that feat since 1991. Chevy sales boss Alan Batey tells Reuters
We have been a very, very strong trucks brand and frankly have underperformed in cars. It’s as simple as that. You have to go back a long way to see a car performance this strong. Although the cars will remain robust and strong, I expect the trucks will come back somewhat in the second half of the year.
Of course it’s not “as simple as that” though. Batey may only be able to use words like “strong” and robust” to describe car sales, but the view is a little different from the dealer level. The owner of New York’s largest Chevy store tells Bloomberg
June started off briskly but has slowed down. Car sales were consistent but our truck business was definitely soft. What is alarming is that we’re not seeing the truck and SUV traffic we have been seeing.
But, at the end of the day, Ford and GM are picking up sales in the short term… which makes it easier to be optimistic about the longer-term picture. But if trucks sales are slowing, buyers are waiting for Japanese-brand inventories to pick up before buying, and GM and Chrysler still have the highest incentives in the industry, Detroit is not going to make as much hay off the post-tsunami chaos as they probably hoped to. It’s beginning to look like the opportunity to take a few free shots at Toyota and Honda’s US-market dominance may be lost already…
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The industry had better get used to the idea that the US is now a replacement market for automobiles, not a growth market. And, many people who are buying new vehicles are moving down in size classes. In cars, Ford and GM are certainly picking up some share from the Japanese. Yes, Hyundai is a big winner of these shifts, but Hyundai has at least as much long memory market baggage to overcome as Ford or Chevrolet do. Light truck sales are going to move back towards the long term trend of 20-25% of the total market. That pretty well correlates with the people who actual need a truck or BOF SUV. The 50% share that segment enjoyed for a decade or so was an anomaly brought on by relatively low gas prices, the nuances of CAFE, and a brilliant decade or so of marketing. But, them days are over.
Wonder how many customers wait for a specific new model like the 2012 Toyota Camry redesign?