U.S. auto industry sales may have declined in September 2009, as many of the major automakers are expected to post sales declines, mirroring the impact of the exhaustion of the "Cash for Clunkers" incentive program devised by the U.S. government.
Consulting firm J.D. Power and Associates is estimating that U.S. vehicle sales could decline to their lowest level of the year this month amid a hangover from the rebate program, which ended in August. According to Barclays Capital auto industry analyst Brian Johnson, September sales would be a Seasonally Adjusted Annual Rate of around 9.6 million, down from about 10 million projected earlier.
Automotive information provider Edmunds.com forecasts a 23% year-over-year decline and a 41.1% monthly drop in industry-wide sales to 742,000 units for the month. It also projects a drop in September's light-vehicle sales rate to 8.8 million units, the lowest rate in nearly 28 years, hurt by poor demand.
Among the U.S. automakers, General Motors Co., which is now known as Motors Liquidation Co. (MTLQQ.PK), is expected to report a 46.1% year-over-year slide in September sales, according to Edmunds.com. It also estimates a 9.7% decline in the monthly sales of Ford Motor Co. (F) and a 48.7% plunge for Chrysler.
Edmunds.com also expects Toyota Motor Corp. (TM) to post a 9.7% sales decline, Honda Motor Co. Ltd. (HMC) an 8.3% slip and Nissan Motor Co. Ltd. (NSANY.PK) a 1.1% drop in September 2009.
Edmunds.com also said that the combined monthly market share for GM, Chrysler and Ford is expected to fall to 42.8% in September from 53.2% a year earlier. However, this is an improvement from 41.1% in August.
According to economic and financial data firm Global Insight, September auto sales in the U.S. would come in at a 9.33 million seasonally adjusted annualized rate, well below the 12.5 million unit rate from last year.
In September 2008, U.S. auto sales were down 26%, coming in below the one million unit mark for the first time in more than 15 years. Overall sales reached only about 965,671 vehicles, compared with some 1.3 million vehicles sold in September 2007.
GM had reported a 12.3% decline in its vehicle sales for September 2008. Ford vehicle sales were down 31.8%, while Toyota and Honda posted sales declines of 29.5% and 20.9%, respectively for prior-year's September, according to Edmunds.com.
"Cash for Clunkers", officially the Car Allowance Rebate System or CARS, became law on July 24. The program aimed at removing polluting cars from the street, while at the same time helping dealers fight off recession. The program provided tax breaks of up to $4,500 to consumers who trade in old gas guzzlers for newer, more fuel-efficient vehicles.
The program was an instant hit, proving to be a blessing in disguise for the car makers in a recession hit atmosphere. Statistics showed that rebate applications worth around $2.877 billion were submitted, under the $3 billion provided by Congress to run the program. As per reports, U.S. customers bought about 700,000 new cars and trucks through the government program from late July through the first three weeks of August.
This buying-spree compared with dampened sales in early 2009 amid the global financial crisis left major auto manufacturers with historically low level of inventories. In addition, several automakers made sharp production cuts due to the economic slowdown. Therefore, the first half of September reportedly saw lower activity at many dealerships due to the shortage of key vehicles although signs of sales improvement were visible in the second half.
Another noteworthy fact is that auto discounts are drying up as major automakers are wary about profit-eating discounts following factory shutdowns and lower supply of cars and trucks. The average incentive offered by the U.S. automakers has declined 22% to $2,474 since reaching its peak in March, according to Edmunds.com.
J.D. Power analyst Jeff Schuster, reportedly explains the reason. According to him, "as we suffered through the worst automotive recession in our lifetimes, the lesson automakers learned was to stay under control and not bloat inventory, which you have to follow with huge incentives to move the metal. From now on, we're going to see a more cautious approach to incentives."
However, August's selling atmosphere was much favorable for the automakers. Boosted by the "clunkers" program, U.S. auto industry sales for the month of August 2009 rose 1% to more than 1.2 million from a year earlier, the first time monthly sales crossed the 1 million mark in the year.
Ford, the only major U.S. automaker that has not filed for bankruptcy, said August U.S. sales rose 17% from last year. The company's August sales growth marks the second consecutive rise in its monthly U.S. sales following a series of declines since November 2007.
The Dearborn, Michigan-based automaker sold 182,149 vehicles in August, up from 155,690 vehicles sold in the same month last year. Sales of Ford, Lincoln and Mercury brands rose 16.8% in August to 176,323 units, while sales of Volvo luxury car unit that is up for sale climbed 24.8% to 5,826 units.
Japan's Toyota said Monday that its sales in Japan were 9.5% lower for the month of August to 92,621 vehicles. Exports also fell 39.3% to 110,843 units. Including subsidiaries Daihatsu Motor Co., Ltd. and Hino Motors, Ltd., the company's domestic sales dropped 4.5% in August to 132,496 vehicles and total exports plunged 40.2% to 117,480 vehicles.
Toyota also said that its August production fell for a 13th straight month, declining 8.7% to 508,673 vehicles from a year earlier. Including subsidiaries, the company's worldwide production was down 9.9% to 566,262 units. Toyota's domestic production fell 23.8% and overseas production dropped 4.7%. Total Japanese production including subsidiaries was 23% lower for the month while total overseas production edged down 3.8% year-on-year.
Earlier last month, American Honda Motor Co., Inc., a unit of Honda Motor, reported August sales increase of 9.9% to 161,439 units from 146,855 units last year. Total car sales grew 23.2% to 106,972 units, while total truck sales dropped 9.3% to 54,467 units a year ago.
General Motors' August sales were down 20.2% to 246,479 units from 308,817 units in the year-ago month. On a sequential basis, the company posted 30% sales growth, helped by the "Clunkers" program.
Daimler AG (DAI) said that its monthly U.S. sales for the Mercedes-Benz Cars division, Mercedes-Benz and smart combined, declined 10.5% in August to 18,734 units from 20,927 units last year.
Chrysler Group LLC, which is currently under the management control of Italy's Fiat SpA (FIATY.PK), posted a 15% drop in August sales to 93,222 units from 110,235 units in the prior year month. Total car sales fell 13% to 22,638 units, while total truck sales dropped 16% to 70,584 units last year.
Currently, the buzzword in the auto industry is hybrid electric car, which combines a conventional internal combustion engine propulsion system with an electric propulsion system. The electric powertrain is intended to achieve better fuel economy amid increasing fuel prices and fears of fossil-fuel scarcity in future, while cutting back on climate-changing greenhouse gases.
In the coming years, the auto sector is expecting several technology advancements in hybrid electric cars and leading manufacturers are geared up for the mass production of a variety of electric vehicles. This would definitely be a silver line of hope for the sector that seeks a cling to get rid of the troubles that shook even giants.
For comments and feedback: editorial@rttnews.com