Submitted by Tyler Durden on 04/01/2016 13:15 -0400
Just as we predicted, it seems – despite the “everything is awesome” jobs data – that auto sales exuberance has hit the wall of credit saturation. Despite a surge in incentives in Q1, GM US auto sales rose just 0.6% (drastically lower than 6.0% rise expectations) and Ford rose 7.8% (missing expectations of a 9.4% surge). As J.D.Power notes “there are worrisome trends below the surface” of auto sales and with inventories at levels only seen once in the last 24 years (and tumbling used car prices), the automakers have a major problem if this is anything but ‘transitory’.
It wasn’t just GM and Ford though:
- *FIAT CHRYSLER MARCH U.S. AUTO SALES RISE 8.1%, EST. UP 14%
- *FIAT CHRYSLER HALTED IN MILAN, LIMIT DOWN AFTER FALLING 4.9%
- *HONDA MARCH U.S. AUTO SALES UP 9.4%, EST. UP 16%
- *VOLKSWAGEN OF AMERICA MARCH AUTO SALES DOWN 10.4%
- *TOYOTA MARCH U.S. AUTO SALES DOWN 2.7%, EST. UP 5.6%
U.S. light-vehicle deliveries, aided by low gasoline prices, rising discounts and favorable financing terms, have climbed 3.4 percent this year through February after rising 5.7 percent to a record 17.47 million in 2015. But on a selling-day-adjusted basis, new-vehicle retail sales in March are expected to fall 2 percent from a year ago, according to a joint sales forecast by J.D. Power and LMC Automotive. It would be the first time there has been a year-over-year decline in sales on an adjusted basis since August 2010, Power and LMC say.
What is most troubling however is, as JD Power notes, the worrisome trends below the surface…
Following an exceptional performance in 2015 with strong sales and record average price per vehicle sold, the U.S. automobile market must adopt a more disciplined approach to maintain long term health for the industry, according to a briefing given by J.D. Power here today at the 2016 J.D. Power Automotive Summit.
J.D. Power warns that incentive spending on new vehicles has risen rapidly in the past year and is trending toward recession-era levels for the industry as a whole and has already exceeded recession-era levels on cars.
The analysis, presented as part of the J.D. Power Automotive Summit, which kicks off the National Automobile Dealers Association Convention & Expo, finds that while overall industry retail sales are expected to grow by 300,000 to 14.5 million units in 2016, the growth is being delivered through actions that pose meaningful risks to the long-term health of the industry. Those actions include elevated incentive spending, increased use of extended loan terms, rising loan-to-value ratios and record levels of leasing.
“Overall, auto sales figures continue to post strong results, but when you peel back just one layer beneath the surface, some worrisome trends are taking hold,” said Thomas King, vice president of Power Information Network at J.D. Power. “Chief among the trends is the fact that first quarter sales incentives averaged 9.6% of MSRP, a 70 basis-point increase from last year and are trending toward levels observed at the height of the recession.
“The increased spending, which is due primarily to manufacturers trying to offset a shift in demand from cars to trucks and SUVs, has the potential to reduce future resale value. Significant declines in the value of used cars would disrupt consumers’ ability to buy new vehicles (due to lower trade-in values), while vehicle manufacturers and lenders would have to deal with exposure on their lease portfolios (if off-lease vehicles fail to achieve their expected resale value).”
And this sales weakness is occurring amid a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years…
And worse still, used car prices starting to fade rapidly (biggest Feb drop since 2008)…
Falling used car prices means pressure on new car prices as well, which would be a shock to America’s booming auto market.
“the U.S. automobile market must adopt a more disciplined approach to maintain long term health for the industry”
TRANSLATION: jack up prices and screw the consumer harder
Car prices are already excessive and climbing, the incentives game has become a mix of “Where in the world is Carmen Sandiego” and Whack-a-Mole. The whole gigantic auto industry is becoming a relic of a bygone age. I’m not predicting the end of cars – instead, that the situation of 30+ major makers fed by 10,000+ component suppliers, selling through 50,000 dealers with a million commissioned but useless salesdrones, is not practical or sane and is going to go the way of Sears and blue collar shopping malls.
No surprise that VW sales tanked. All the TV addicted drones swilling the EPA’s koolaid and “knowing” that VW has committed a crime against humanity are now staying away from VW.
Here’s a quote from a thread on Eric Peters’ site about the VW crucifixion:
“UAW lost the Union Vote of the Tennessee VW Plant in 2014 and this is just one of the pro-union/pro-collectivism Progressive/Liberal/Democrat retaliation steps to that embarrassing defeat.
The Passat TDI was being built in the Tennessee plant, and they had announced in July-2014 that they were to start production of the new VW mid-sized SUV “CrossBlue” starting in 2016 and was expected to add another 2,000 non-UAW workers to the facility which already has 13,000 employees.”
That’s 13,000 existing jobs and 2,000 more intended newly created jobs just flushed down the toilet by the EPA. I do wish the fuckin federal government would just quit helping industry. Oh, and BTW, fuck unions, all unions everywhere.
Today I paid off my car loan balance 6 months early. That monthly amount will now be direct-deposited into my credit union savings account. It was either that or bump up my 401k contribution to 10% vs the current 6% (the company I work for doesn’t match any more than 6%). Plus it’s after-tax money so I won’t be hit with any withdrawal penalty or taxes when it’s time to use it for retirement.
@Ed: That’s right, just let the fucking companies INTENTIONALLY break the law because “jobs”. If they can’t do it straight and clean they shouldn’t be in the fucking business!
We work for a six different Auto parts suppliers, while they are still churning out the parts and working overtime, the engineers know there is a slowdown coming.
No new hiring, and they are slowing down with capitol improvements, keeping their powder dry I guess.
More news, did Obama save GM and America, or?
“The carmaker paid just $5 million in federal taxes last year, its SEC filings show. For its total federal, state and local bill, all in, it booked zero taxes, the filings show. Meantime, in 2015, GM paid more than $908 million in taxes to China.”
Our stimulus dollars at work.
I guess they ran out of idiots to toss into the subprime auto loan meat grinder.
Nobody else is going to pay $50,000 for a $15,000 car or truck.
Though, in fairness, most of the idiots they did find, have already stopped making those loan payments.
Should end well.
Man, Westcoaster, you are beyond stupid.
When GM broke the the law that you speak so preciously of – by knowingly outfitting their cars with faulty ignition switches that resulted in over 100 deaths in a decade – the government fined GM $35M.
That amounts to 3% of GM’s net profit for the 2014 fiscal year.
In contrast, VW gets fined $18B, which is $5B more than total profits for 2014,
So, GM hurts and kills people? Gets a slap on the wrist. Meanwhile the CEO keeps her job.
VW hurts the air? Gets fined out of existence.
Go to google earth and in the search box type in:
S 10th st & E Alma ave San Jose ca
To the south of that intersection you’ll see a parking lot that is about 5 acres. That image is dated 1/31/16 and what you will see are just over 500 cars parked in that lot. Those are all new Honda s; that must be some dealers overflow lot.
I just drove by there about an hour ago and it looks like there are even more cars there now.
Channel stuffing maybe?
“@Ed: That’s right, just let the fucking companies INTENTIONALLY break the law because “jobs””
West, poor kid, I tried to warn you about huffing glue and Krylon. Now just look at you. Now that I’ve expressed my condolences; EPA regs are NOT the law. They are agenda driven edicts foisted upon an unwilling populace by unelected bureaucrats. Laws are passed by Congress, and congress alone, just read the US Constitution.
Since you’re supposed to be a fuckin democrat and all, maybe this undemocratic bullshit will wake you up. Anyway, fuckin unions are the ones who “INTENTIONALLY break the law because “jobs””. Oh yes, and unions also are allowed to get away with breaking the law because otherwise, ‘it just ain’t no fair, for the fuckin workers and everything’. Y’know?
China and India will finally get permission to sell simple cheap cars here someday and the public will dump the $35,000 electronic pigs. I bought a 1965 MG Midget with oversize rear tires and it got 39 miles to the gallon but had to sell it when the USAF shipped me overseas; it was the best car I ever had.