From Wolf Street, by Wolf Richter
“We think the industry is plateauing at some levels.”
What I’ve been fretting about – declining auto sales despite the biggest incentives ever to overleveraged car buyers as the bottom is falling out of subprime auto loans and used car values – is now a reality.
Total new vehicle sales in March fell 1.6% year-over-year to 1.556 million cars and light trucks, according to Autodata, and are now down 1.5% year-to-date, with truck sales rising 5.2% and car sales plunging 10.6%.
This wouldn’t be so bad – just an “unexpected” sales decline – if automakers had not shelled out $3,768 per new vehicle sold, the highest ever for any March, according to J.D. Power. This would be about 10.4% of suggested retail price. The prior record for March occurred in 2009 as the industry was collapsing.
These are unit sales by franchised dealers to their customers, and by manufacturers to large fleets and to their own employees under their employee programs.
Inventories are bloated, and the number of days a vehicle sits on a dealer lot before being sold rose to 70 days on average in March, according to J.D. Power – the longest since July 2009.
Here’s the thing: As incentive spending in March surged 13.4% year-over-year, according to TrueCar estimates, total vehicle sales fell 1.5%!
“We think the industry is plateauing at some levels,” Ford Chief Economist Emily Kolinski Morris mused on a conference call.
And it surprised the industry soothsayers. TrueCar figured that sales would increase 0.2% to 1.586 million new cars and light trucks. J.D. Power and LMC Automotive expected sales to increase by 1.9%, to 1.62 million units, based on the surge in incentive spending. At the time (March 26), I just couldn’t help myself pooh-poohing these estimates:
If sales nevertheless fall, everyone will blame the winter storm that arrived in the winter – “unexpectedly” or something. And it is possible that sales might fall. There was no winter storm in February, which was one of the warmest Februaries on record. Yet, sales in February fell 1.1% year-over year. They edged down in January too. And sales in both months combined fell 1.4% from the same period a year ago.
To accomplish the feat of a 1.5% sales decline in March, auto makers spent a total of $5.54 billion in incentives, according to TrueCar estimates.
Read more at Wolf Street…