Analysts Stay Cautious after Automakers Cheer October New-Vehicle Sales Performances


SANTA MONICA, Calif. - 

Several automakers used descriptions such as “record” and “best since” to highlight their October new-vehicle sales performance.

But such lofty words are why analysts from Edmunds.com, TrueCar and J.D. Power and Associates sounded cautious when discussing what October’s sales numbers mean in the near term and beyond.

“High prices and inventory shortages in late April through August kept some consumers from the market. Netting it out, there were easily 200,000 sales that would have occurred this year that were deferred. These consumers started returning in September and have fueled a sales rebound,” Edmunds.com chief executive officer Jeremy Anwyl surmised.

“Depending on pricing and availability through December, most of this should play itself out by year-end,” Anwyl continued. “This suggests we should view sales in October with a degree of caution. The performance over the past few months is not the start of a trend. It is more of a mini-bubble.

“I do expect that the level of demand for vehicles will continue to rise until next year,” he went on to say. “There are a growing number of consumers for whom a new vehicle is becoming a necessity, but I expect the slope of this underlying trend to remain modest.”

J.D. Power estimated October retail seasonally adjusted annualized rate (SAAR) is expected to come in at 10.5 million units, which is at the same level as September. J.D. Power placed the total light-vehicle selling rate at 13.1 million units for the month.

“The relatively strong selling rate seen again in October suggests that the fourth quarter may close stronger than previously expected,” stated Jeff Schuster, J.D. Power’s executive director of global forecasting.

“Recent bright spots in the economy may also help calm nerves and support stable vehicle sales, but risks remain and consumer confidence is still low, tempering the outlook for 2012,” Schuster added.

TrueCar vice president of industry trends and insights Jesse Toprak told Auto Remarketing that October sales ended up where he expected with the SAAR going above the 13-million mark.

“It appears the last week of the month we saw a decline in sales,” Toprak acknowledged. “We have two reasons to blame for the lackluster finish to October. One is the instability in the financial markets. The other was the unseasonably bad weather in some parts of the country that kept shoppers away from dealers.

“The month of October was one of those months that despite some uncertainty, we were able to post over 13 million in sales, so that means the underlying demand for car buying is healthy but far from being ideal,” he went on to say. “We’re going to have a long way to recover in terms of getting back to what we’d call the normal sales, which we think is about 14.5 million units. Industry sales are about two years from reaching that point. We expect to see about 13.7 million unit sales in 2012.”

Impact on Used-Vehicle Market

While automakers talked plenty about their new-vehicle sales, Auto Remarketing asked Toprak about what the October performance means to dealers’ used-vehicle departments.

“If you think about it, the factory that makes used cars is new-vehicle sales. If you don’t have the factory working that well, you’re not going to have used cars to sell. It’s that simple,” Toprak explained.

“The last two or three years, we saw some of the lowest new-vehicle sales volumes in the industry, which in turn have caused shortages for 1- to 3-year-old used cars in the remarketing world,” he continued. “That’s caused some of the highest resale values we’ve seen in recent history, which can be a good news or bad news scenario depending on if you’re trying to buy or sell.

“That’s going to be relieved somewhat as we get new cars sold and provide fresh inventory to the auctions and dealers. But that’s going to take time,” Toprak went on to say. “I don’t think we’ll see volume beyond 13.5 million for a while. It’s really going to take another year or so before we start to see any significant easing in used car prices, we’re talking Q4 of 2012 really by the time increased new-vehicle inventory starts easing pressures on used cars.”

Domestic OEM Performance

By far, the member of the Big 3 that showed strong October improvement was Chrysler.

Chrysler reported U.S. sales of 114,512 units, a 27-percent increase compared with sales last October, which totaled 90,137 units. The company insisted this was its best October sales level since 2007.

OEM executives from Auburn Hills, Mich., explained their 27-percent sales increase was driven by retail sales that were up 40 percent in October. They declared they have beaten the average industry sales increase in nine of 10 months this year.

“In what is turning out to be a strong new vehicle sales industry we continued to outperform,” stated Reid Bigland, president and CEO of Dodge and head of U.S. Sales.

“For October, our retail sales increased 40 percent year-over-year with sales of the Chrysler 300 more than doubling and Jeep Compass sales increasing fivefold. The month of October also marked our 19th-consecutive month of year-over-year sales gains,” Bigland continued.

Chrysler’s performance left Michelle Krebs impressed. Krebs is one of Edmunds.com’s senior analysts.

“It was another great month for Chrysler, much of it again on the strength of Jeep,” Krebs began. “Every model in the Jeep portfolio saw a sales increase — and some of them whopping increases like the more than 500 percent on the Compass — except the Grand Cherokee, which was off just a bit.

“The Chrysler brand also got a huge boost from its 200 — 11,000 sold — that replaced the Sebring and promoted in the famous Super Bowl ads that featured the streets of Detroit and Detroit rapper Eminem,” Krebs continued. “Ram had a strong truck month so did the Dodge brand. Fiat 500 still looks to be underperforming expectations with sales of under 2,000 units last month. So far we are seeing pretty decent full-size pickup truck sales — this is their season after all.”

Over at Ford, the Blue Oval made gains but not as much as Chrysler.

Executives from Dearborn, Mich., declared that continued strong demand for Ford’s fuel-efficient utility vehicles and trucks lifted the company to a 6-percent increase in total sales in October. 

With total sales of 167,803 vehicles, gains came largely from Ford brand utilities, up 38 percent, and strong truck sales, up 8 percent versus last year.

“More and more consumers are being attracted to Ford’s lineup of fuel-efficient vehicles – from cars and utility vehicles to our full-size pickups with EcoBoost engines,” stated Ken Czubay, Ford vice president of U.S. marketing, sales and service.

“The Ford brand continues growing its market share, showing we have the vehicles and technologies people truly want and value,” Czubay continued.

Year-to-date, Ford’s new-vehicle sales totaled 1,700,618 units, up 17 percent from a year ago. With this performance, the Ford brand is now on track to increase its market share this year by about 1 percentage point — which would mark market share gains for three consecutive years.

Another of Edmunds.com’s senior analysts, Jessica Caldwell, surmised “Ford’s strength is in trucks and utilities this month. Escape sales are extremely strong as attractive incentives are keeping the aging model competitive in its segment.”

Caldwell’s colleague Krebs added, “Lincoln continues to suffer and may not recover until the long-awaited revamp arrives, which remains some time off.”

Meanwhile over at General Motors, the folks from Detroit pulled in a 2-percent year-over-year sales gain in October, reporting total sales of 186,895 vehicles. GM indicated retail deliveries were up 3 percent compared with the same month a year ago and accounted for 77 percent of the OEM’s sales.

Deliveries to fleet customers were essentially flat, according to the company.

“Chevrolet led the way for GM in October driven by the continued success of the Cruze and Equinox,” stated Don Johnson, GM’s vice president of U.S. sales operations.

“Chevrolet, Buick, Cadillac and GMC have all performed well this year, which has set the stage for our transition to a higher mix of 2012 model-year vehicles,” Johnson continued. “Combined with the launches of several new fuel-efficient cars, including the Chevrolet Sonic and Buick LaCrosse eAssist, we are very well positioned going forward.”

In October, GM’s year-over-year car sales increased 4 percent, crossover sales decreased 1 percent and sales of trucks, which include full-size pickups, vans and SUVs, increased 2 percent.

For the month, 2012 models accounted for 80 percent of passenger car sales and about half of truck and crossover sales.

Krebs thought GM sales total came in lower than predicted. As a result, she wondered, “Is GM’s momentum slowing? Of the four brands, only Chevrolet posted higher sales than a year ago.”

Krebs noted Chevrolet sold a little more 14,000 Cruze models, well off the “impressive pace” it was selling at in the spring.

“Sonic just went on sale and sold 3,833 of them — that's just over half the pace of the Aveo sold a year ago though I’d expect that pace to improve with availability, marketing, etc,” Krebs continued. “Still is this a slowdown in the small-car segment or the result of added competition from Ford Focus, Hyundai Elantra and Accent, even the Honda Civic? We'll see. Volt had its best month ever selling 1,000, matching the recent pace of the Nissan Leaf despite the higher price point.

“Cadillac was down — every model showed a decline but the SRX crossover — in part, because Cadillac is revamping its line, killing off old models with new ones scheduled for debut in 2012,” Krebs went on to say. “Most concerning for GM is Buick, which for the past two years has been the one of the fastest growing brands (when comparing year-to-year sales increases). This month, only its Regal showed an increase over a year ago.”

Highlights from Foreign OEMs

Nissan was one of the foreign automakers to use “record” in its rundown of October sales.

Nissan North America reported October U.S. sales of 82,346 units, versus 69,773 units a year earlier, an increase of 18 percent.

The OEM’s Nissan division sales set a new October record, increasing 22.1 percent for the month to 75,484 units. However, sales of Infiniti vehicles decreased 13.5 percent from the prior year to 6,862 units.

Despite the slide by its luxury nameplate, the company cheered Nissan’s October performance.

“It was a record-setting October for all of Nissan, led by key models like Altima, Versa and Rogue,” stated Al Castignetti, vice president and general manager of the Nissan division.

“It’s clear that, with a winning lineup of cars, trucks and crossovers, Nissan is ready for a strong finish to 2011,” Castignetti declared.

Another of Edmunds.com’s senior analysts echoed Castignetti’s expectations.

“Nissan’s record October sales show the company not only has a product range and price point that currently is well-aligned with consumer demand, but that the company probably still is enjoying an advantage in vehicle availability compared with chief rivals Toyota and Honda,” Edmunds.com’s Bill Visnic explained.

“Considering that the Thailand flooding may further prolong inventory shortages for Toyota and Honda, Nissan may extend its supply advantages through the end of the year,” Visnic continued.

Caldwell added, “When it comes to incentives, Nissan significantly outspends its two Japanese rivals. It’s spend is closer to Ford and Chrysler than to Honda and Toyota.”

And from Krebs, she said, “Nissan had a strong month with three of its volume models setting record sales for October: Altima, Versa and Rogue. Despite the automotive press dismissing the 2012 Nissan Versa sedan, it is selling like hotcakes.”

What other foreign nameplates had records to highlight coming out of October performances? Two were Hyundai and Kia.

Hyundai Motor America announced sales of 52,402 vehicles in October, a 23-percent total sales increase compared with the same period a year ago.  The brand’s year-to-date sales figures of 545,316 shattered the full year sales record of 538,228 set a year ago.

Hyundai added its retail sales also were up 27 percent over last October.

“Breaking our all-time any-time sales record set in 2010 — with two months left in the 2011 calendar year — is an accomplishment we take great pride in and is clearly indicative of consumer acceptance of our bold lineup of award winning products,” insisted Dave Zuchowski, Hyundai’s executive vice president of national sales.

“The overall sales environment appears to be stabilizing, despite continued fluctuations in traditional economic indicators, and we believe those market dynamics position Hyundai well to finish the year on a strong note,” Zuchowski continued.

Year to date, Hyundai said its sales are up 21 percent versus 2010 in total, and up 31 percent at retail. The company noted sales to fleet accounts represent 11 percent of the total sales year-to-date and just 8 percent for the month of October. 

Meanwhile, Kia Motors America wrapped up its best-ever October sales performance — moving 37,690 units. That total was a 21-percent increase over the same period last year and the company’s 14th straight monthly sales record.

Kia’s year-to-date sales are up 35 percent, and the brand has eclipsed the 400,000 vehicle sales mark for the first time in company history.

The U.S.-built Sorento was once again the brand’s best-selling vehicle with 10,178 units sold in October, while demand for the Optima midsize sedan, which recently was added to the production line at Kia Motors Manufacturing Georgia, remained strong with 8,616 units sold.

“Kia has experienced unprecedented growth in the past 36 months and undergone a complete design-led transformation that has changed the game for us as a brand,” stated Byung Mo Ahn, group president and CEO of KMA and KMMG.

“In just three years, we have brought nine new vehicles to market, something no other manufacturer can say,” Ahn continued. “The recently launched Rio 5-door offers consumers a refreshing mix of world-class styling, performance, technology and outstanding safety and value in the B-segment, and with the upcoming introduction of its sedan sibling Kia will offer three vehicles that deliver up to 40 miles per gallon.”

A couple of luxury nameplates had record October performances, too.

Mercedes-Benz USA (MBUSA) reported October sales of 24,449 vehicles, a 28.2-percent improvement over last October. The level turned out to be the company’s highest October volume on record. On a year-to-date basis, the 206,632 vehicles sold represent a 12-percent increase over the 184,431 vehicles sold during the same period last year. 

Meanwhile, Audi posted record October U.S. sales of 10,225 vehicles, topping the 8,128 vehicles sold in October of last year. With last month’s results, the Audi brand has set record U.S. sales every month of this year.

Audi U.S. year-to-date sales increased 16.5 percent to 95,206. The brand has recorded record sales in 14 out of the past 15 months.

The year-to-date sales for 2011 already rank as the second-best year in the U.S. for Audi, only trailing only the record 101,629 sales established in 2010.

“As we head into the fourth quarter, it is clear that consumers are eager to drive the superior lineup of Audi vehicles,” stressed Audi of America president Johan de Nysschen.

“Sales continue to reinforce that Audi holds a desirable position within the high-end sector of the premium car market due to our exceptionally engineered vehicles,” de Nysschen continued. “All signs continue to point toward 2011 winding up as one of the best years for Audi in the U.S. market.”

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