Just maybe $5 billion less in net govt spending each weak does matter???
By Alan Ohnsman
March 13 (Bloomberg) — Sales of new cars and trucks in the U.S. have cooled to the slowest pace in more than three years even as automakers increase spending on incentives.
The average number of days needed to sell new vehicles rose to 64 at the end of February, the most since August 2009, Bloomberg Industries said in a report today. Carmakers have also raised incentives to 7.8 percent of a vehicle’s price to lure buyers, the highest ratio since 2011, analyst Kevin Tynan wrote in the note. Incentives increased more than 8 percent in both January and February, he said.
Vehicle sales have remained a bright spot for the U.S., expanding more than 10 percent annually since 2010, the year after bankruptcies for the former General Motors Corp. (GM) and Chrysler LLC. Growth is slowing this year, with total light- vehicle sales rising 3.7 percent in February, according to Autodata Corp.
Still, it’s premature to be concerned as the pace of growth is returning to pre-recession levels, said Jessica Caldwell, industry analyst for Edmunds.com.
“Even though it’s creeping up a bit, it doesn’t start to raise eyebrows at this point,” she said. “The number of days needed for a sale have risen, but it’s stabilized in the low 60s.”
Brands seeing some of the biggest increases in average numbers of days needed to sell their vehicles include Chrysler, GM’s Chevrolet and GMC brands and Ford Motor Co. (F)’s Lincoln line, said Caldwell, who’s based in Santa Monica, California.
Addition: Excellent color from Greg, thanks!
On Wed, Mar 13, 2013 at 9:41 AM, Greg wrote:
Hi Warren – to be clear, I do believe there is some impact from less net govt spending on the industry, but I wanted to point out that the author of this article fails to account for fewer selling days in the U.S. during Feb 2013 vs. Feb 2012 (24 days in Feb 2013 vs. 25 days in Feb 2012). Adjusted for selling days, total U.S. Feb 2013 light vehicle sales were up +8.0% YoY. On a seasonally adjusted rate, US light vehicle SAAR is up 8% YTD, although the 15.3mm unit selling rate in Feb was only up 6.25%.
Avg. vehicle sales in the U.S. between 2001-2006 were 16.9mm units before falling off a cliff during the crisis, troughing at 10.4mm units in 2009 (which would have had a 9-handle were it not for “cash-for-clunkers”). A lot of that pre-crisis volume was driven by large incentives to drive volumes and share as OEMs we only profitable well north of 14mm SAAR. Breakevens for OEMs in the U.S. were reduced to just north of 10mm SAAR during the crisis, and one view is that, going forward, the new normalized U.S. SAAR may not reach the level of the early 2000’s, meaning 2013’s consensus 15.5mm units is approaching peak. Nonetheless, we’ve seen incentive activity increasing notably in Jan and Feb, reversing the trend of post-crisis discipline, which may be another signal that it’s becoming more difficult for households to pull the trigger on car purchases.