by Mish

Not to worry, Detroit Auto Makers Are Upbeat as Sales Volumes Stall.

Industry observers say they don’t expect a collapse in sales, even if demand drifts below record levels hit last year. “Total sales are still strong from a historical perspective and the decline is very gradual,” said Jessica Caldwell, an analyst at, an auto-research firm and car-shopping website. “It shouldn’t really be seen as alarming.”
Auto makers say they’ll stay disciplined and trim production levels to reflect weaker demand instead of cutting prices to keep their factories humming.
Concern about rising spending by auto makers to maintain sales growth may be overblown, Barclays Capital said in a recent research note. Industry incentives as a percentage of average transaction prices came to 11.2% in the first half of April, the lowest level since June, the brokerage said. “A big driver of the improvement is GM, which is pulling back on incentives despite elevated inventories,” it said.
GM finance chief Chuck Stevens told analysts the company built up stocks of some SUV models ahead of scheduled down time at several factories this summer and fall, and said inventory will return to normal later in the year. He said that even with more discounts, price levels remain healthy.
“It’s not like we’re sitting and waiting for a downturn,” Mr. Stevens said. “Day to day, we’re very focused on acting like we’re in a downturn” by cutting costs and trimming vehicle production to meet demand, he said.

Red Flags for Retailers


Automotive News cites Red Flags for Retailers while asking 17 million or bust?

The industry has crossed the line into risky territory on automaker incentives, leasing levels and new-vehicle inventory, said AutoNation Inc. CEO Mike Jackson.
“It’s clear the industry intends to sell over 17 million vehicles this year, if I look at the inventory and the production plans,” Jackson said.
But Jeff Dyke, Sonic Automotive Inc.’s executive vice president of operations, said that without hefty factory incentives, today’s natural sales rate is closer to 15 million.
“To me, 30 percent leasing has always been a red line, where you’ve had a massive distortion if you take it above that,” Jackson said. He called incentives that top 10 percent of sticker prices another red line, and inventories above a 70-day supply yet another. “So we have three red lines that the industry in total is over on new vehicles,” he said.
March, incentives “went berserk,” said Sonic’s Dyke. He expects incentives to fluctuate all year, with the next spike in June.
“The incentives are all over the board,” and will remain so, he said. “I expect to see a topsy-turvy incentive environment.” Most automakers “have a good amount of supply so they will continue to push incentives on us,” Dyke said.
Earl Hesterberg, CEO of Group 1 Automotive, said the retailer’s new-vehicle inventory at its U.S. stores was 86 days, consistent with the year earlier but far too high. Domestics were the biggest challenge, he said. Group 1’s General Motors, FCA and Ford inventories were all more than 100 days.
Sonic’s Dyke said BMW is encouraging its dealers to do fewer leases and more sales, a feat he says is nearly impossible without losing volume because consumers can get into a lease for a lower monthly payment than with a sale.
“It’s a conundrum right now and something we have to figure out,” said Dyke. “The residual value is going to have to go up so [the consumer] doesn’t take it in the shorts at the end of the lease term.”

Add a fourth flag to the list: massive industry complacency in the face of weakening fundamentals.

Mike “Mish” Shedlock

Auto Sales Puke Again: Year-Over-Year Totals: GM -6%, Ford -7.2%, Toyota -4.4%, Fiat-Chrysler -7.0%

Auto sales are down for the fourth consecutive month. Final numbers are not yet in, but the preliminary year-over-year totals are miserable.

J.D Power and LMC Estimate July Auto Sales Down Five Percent, Time in Inventory Highest Since 2009

July auto sales based on mid-month totals look grim despite record incentives. Industry analysts J.D Power and LMC estimate U.S. July auto sales down 5 percent.

Auto Sales Jump Following Hurricanes

Auto sales are running substantially above estimates according to Econoday.

Auto Inventories Highest Since July 2009:Concerns Mount, Ford Vehicle Sales Decline 7.2%, GM Up 1.6%

More auto numbers will come in later in the day, but the initial reports show Mixed Sales Results in March.

Auto Sales Weak Again, Average Loan Hits Record 5.75 Years: Don’t Worry “Plateau Expected”

With about 3/4 of the totals in, vehicle sales in June are running no better than even compared to May’s 16.7 million annualized rate according to Econoday.

Existing Home Sales Unexpectedly Decline to 2017 Lows

On the heels of an unexpected decline in new home sales yesterday, comes news of an unexpected decline in existing home sales today.

GM Says “Market is Definitely Slowing” Lowers Outlook for Vehicle Sales

Reuters reports GM Lowers Outlook for U.S. 2017 New Vehicle Sales, but not by enough in my estimation.

Auto Sales Dive: Second Quarter Retail Spending Off to Bad Start

Auto sales took a dive in April. This is our first glance at second-quarter consumer spending strength.

Auto Sales Final Numbers: Down 5.7%, Two-Year Low; Don’t Worry, It’s Just a Plateau!

The final motor vehicles numbers for March are now in. First Quarter GDP estimates will dive as sales were far below the lowest estimate.