https://www.bloomberg.com/news/artic...o-sales-update

Grim Start to U.S. Auto Sales Stirs Alarm That Collapse Is Here

U.S. auto sales took a big step back in September, setting the stage for hefty incentive spending by carmakers struggling to clear old models from dealers’ inventory.


Results were disastrous for leading Asian automakers Toyota Motor Corp. and Honda Motor Co., which both suffered double-digit declines that were worse than analysts anticipated. While a fuller picture will emerge Wednesday when General Motors Co. and Ford Motor Co. are due to report, the poor performance suggests that overall deliveries of cars and light trucks could come in worse than the 12% drop anticipated by analysts, based on six estimates.

Even so, shares in the Japanese automakers held steady in Tokyo following the announcements, with Toyota down less than 1% and Honda declining 1.7% in the morning.

The severity of the slide stokes fears that a long-anticipated car sales collapse may be arriving. The slowdown puts auto dealers already struggling with shrinking profit margins in an even more precarious position. With outgoing model-year vehicles clogging their lots, automakers had to pony up record incentives of more than $4,100 a vehicle in the third quarter, according to researchers at J.D. Power and LMC Automotive.





A closely watched measure that aims to smooth out month-to-month sales swings — the seasonal adjusted annualized rate, or SAAR — suggests the pessimism reflected in how auto shares traded Tuesday may be overblown. The rate was 17.2 million in September, according to Ward’s Automotive Group, up from 17 million in August, which benefited from more selling days this year, including the Labor Day holiday weekend.

Here are highlights from the carmakers that have reported results for last month:

Toyota’s Across-the-Lineup Tumble

Toyota saw it sales plunge 16% in September, with both its namesake and Lexus luxury brands dropping by double-digit percentages. Deliveries fell for almost every model, including its best-selling RAV4 crossover and Camry sedan.

While carmakers struggled with September being a shorter sales month, Toyota can’t entirely blame the calendar. Even on a daily selling rate basis, total deliveries were down 9.2%.

Honda’s Turbulent Two Months

Honda had a rough September after logging its best U.S. sales month ever in August. Deliveries fell 14% last month, a much worse showing than analysts expected.

Major models that stumbled in September include the Pilot SUV (-40%), Accord sedan (-20%) and CR-V crossover (-15%).

Nissan Not as Bad as Feared

Nissan Motor Co. led declines among the major companies that reported Tuesday, as the Japanese carmaker continues to struggle in the post-Carlos Ghosn era. Deliveries decreased 18%, though analysts were expecting an even steeper drop of 21%.

The models that slid most give reason to be downbeat about profitability. Sales of Nissan brand pickups and sport utility vehicles -- which tend to be more lucrative than passenger cars -- dropped 21%, and deliveries for the Infiniti luxury division fell 44%.

Subaru’s Incredible Run Ends

It nearly lasted the length of a two-term U.S. presidency, but Subaru Corp.’s streak of monthly sales increases is over.

The Japanese carmaker’s run ended in September after 93 months -- almost eight years. Deliveries dropped 9.4%, with Tom Doll, chief executive officer of Subaru’s U.S. sales division, citing a rapid sell-down of older-generation Legacy sedans and Outback crossovers.

Palisade Powers Hyundai

Hyundai Motor Co.’s namesake brand may have weathered the month better than others in the industry, with sales slipping 8.8%.

The South Korean company started U.S. deliveries of the Palisade, a three-row flagship SUV, in June. While it’s quickly become one of the carmaker’s better-selling models, Hyundai was unable to measure up against the numbers it posted a year ago. It still expects to have gained market share for the quarter, Randy Parker, Hyundai’s U.S. vice president of sales, said in a statement.

 

If you go back to my past posts, I have been using the words "upcoming downturn" quite a bit. I see that as the reason why Toyota has stalled their redesigns of Tundra, 4Runner and LX or GX.

I believe the slowdown is starting. The US auto section is ready for a collapse.

Positive note: Hyundai despite having slower sales have picked up market share. A good thing for Hyundai as their prices are not as high as their comp. Kudos

 

car are getting more expensive and lasting longer. Average age of vehicle on the road keeps going up so people are keeping their older car or buying used. All these factors will harm new sales

 

Last year auto sales set a record. So all of a sudden this year people are now holding on to their cars longer? Toyota, Honda, and Nissan are all in double-digit declines

 

Agree. This is a long-term trend, one that has seen the average age of vehicles on the road increase by 4% over the past 5 years, to its current average of 11.8 years. This sort of long-term trend doesn't portend a 14, 16, 21, or 44% decrease in sales over the course of a quarter. What does is a more general recession--the 2008 to 2013 window saw the average vehicle age increase by 12.2%, despite the "cash for clunkers" initiative giving new car sales a shot in the arm, while simultaneously taking older cars off the road permanently. Leading up to the great recession, the 5-year-change was 3.5%, much in line with what we've seen the past 5 years.

 

Some of what is behind it is political (and/or media-based), so Dave and the moderators may or may not allow us to discuss it in this forum. On that part, I won't make any more comments unless they give a green light.

On the non-political part, I think several factors are at play. The fact that last year set a sales record means that a lot of people have vehicles that are less than two years old...not quite old enough turn in at the end of most lease-contracts, but still new enough to take a bath if they trade them in. On average, the depreciation-curve in a vehicle's life is steepest the first two years, and starts to flatten out in the third year, dropping to near zero by 10 years. Second, because GM and Ford are dropping so many of their sedans, a lot of their (non-SUV) customers are simply staying out of GM and Ford dealerships, preferring to hold onto their existing older sedans rather than shop for new SUVs or trucks...or buy new sedans from competitors. Third, the massive GM strike in September has a lot of the public galvanized behind the UAW (polls show that 64% of the public supports the strike)...and that hostility towards GM right now, may also be affecting sales at other companies if the public also perceives them as abusing their employees. Fourth, The Fed may have raised rates too quickly the last year or so, and recently dropped them again.....it will take a little while for that reduction to work through the system into lower rates for car-buyers. Fifth, I think 4TehNguyen is at least partly correct....new vehicles, on average, last longer, and, because so many of them were replaced last year, that robbed Peter to pay Paul.....it will slow sown this year's sales somewhat. I don't totally agree with Jill's viewpoint that the flood of sales last year doesn't explain what's happening now.

I do not agree, BTW, that this is necessarily a long-term trend. If nothing else, as more of a charge-outlet infrastructure is built into the nation and economy, sales are going to (gradually) shift from ICEs to BEVs and plug-in hybrids.

 

Yet MB and BMW is up, if you believe their numbers.

 

one year doesnt make a trend

 

i think too much of the population is tapped out. car makers have had a good run with tons of new models, a rush from sedans to suvs/crossovers, and boatloads of extended and cheap financing.

but with tons of people on 60-84 month car loans, student debt, credit card debt, medical bills, rents rising, cars lasting longer, and maybe even some hesitation from buyers not sure whether to buy an ICE car or wait for an EV that appeals, i believe a big downturn is inevitable.

 

What downturn are you talking about, economy or car sales? One month does not prove or show anything other then a bad month which had fewer selling day or maybe enough people have newer cars now they don't see the need for upgrading in as large numbers, many may like their older cars more compared to newer ones with often more aggravating touchscreen/mouse systems.

We have been hearing there was going to be a economic down turn/collapse for over 3 years and it has yet to happen. Seems like some are hoping it will happen for various reasons.

 

I wonder why the article is titled "Grim Start.." We're in the 10th month of the calendar year - why is this considered a "start"? I just re-read the sticky on September sales numbers (Toyota) and through September, Toyota is down 2.5% compared to same time last year. That's not horrible and is way more indicative of the macro.

Also, I wonder if comparing September 2019 to 2018 is hard if a decent number of manufacturers launched their completely refreshed/redesigned 2019 vehicles in Sept 2018 - so lots of buyers grabbing the refreshed models in Sep or Oct 2018 and maybe less folks doing so now? For now, I won't pay any attention to this as I'm more interested in aggregate numbers for a period of time much longer than a single month compared to prior year.

 

I guess it alarming as everyone is down. Double digits for the big Japan players.

 

My personal stance is that it's not as alarming in a one month snapshot as it would be in a quarter, or certainly 1/2 or full year. There are a lot of reasons that could contribute to weird buying cycles. Analyzing sales of high-priced items is different than analyzing sales of items that are more transactional (lower cost).

 

no, toyota's down 2% ytd. honda is flat. mazda down 11%
hyundai up 3% kia up 2.6% vw up 4.5% volvo up 4.7%

i would say toyota/lexus is just losing market share due to a weak line up except for camry/corolla/rav4 and es/rx.

 

Half the population is unhappy with the current political situation, and a portion of that half are probably hoping for an economic downturn as a way of changing the current political situation. I don't know that percentage, but I am highly skeptical of any "reporting" that says bad times are nearly upon us, since most journalists are part of the group that is hoping for political change.

Time will tell. There was a lengthy article in the WSJ today that said more and more folks are buying new cars with very long loan terms. It also mentioned that one-third of used-car sales now are happening with negative equity. Perhaps people are realizing that they are over-extending themselves and are simply pulling back.