February Auto Sales Insight

By Dennis DesRosiers

(CHATHAM, ON) – Following is my monthly analysis of light vehicle sales. I’ve done these for decades and enjoy writing up something each month but everyone also needs to know that there are a lot of issues with comparing monthly sales with same month year ago sales. Some include:

1. Gaming of the numbers to show positive results…this would include:

  • reporting of fleet sales which can skew a month one way or the other
  • consumer incentives which can pull forward sales
  • dealer incentives which can work both ways… if a dealer has maxed out his incentive they will delay reporting sales and if they need sales to reach incentive targets they will forward sales
  • it is not unheard of for OEMs to just report fake numbers to show a positive result in any month although it is near impossible to prove and is rarely done but it has happened in the past

2. Comparing current month over year ago month when we know there were issues with the previous year’s sales…this is often referred to as “weak comparable’s or strong comparable’s”.

For instance, some OEMs may have had a very weak month a year ago so any decent month this year will look good in comparison but if you look at trending data they may actually be having a poor year. Later this year the Japanese will report huge gains because of the tsunami shortened supply line sales in some months during 2011 so no doubt there will be some huge increases to report.

Some OEMs get caught on the other side of this issue as well like Ford this year. Last year was a blow out month in February so this February looks weak but is actually quite average relative to long term trends.

3. Mix of vehicles being bought can also skew the numbers.

For instance, almost all the increase in market share with the Detroit three the last two years was because pick-up truck sales ran radically above trendline and Detroit dominates this segment accounting for 95 percent of sales. If Pick-up trucks had come in at more normal levels the Detroit three would not have had as significant increase in market share. This is likely going to be the case this year. One Detroit company may do better than others but collectively if Pick-up trucks don’t sell as well this year the three together will lose share.

So always be careful with monthly sales reporting and try to stand back and take a broader view. All may not seem like it is being reported. And the two worse months each year are January and February so be extra cautious at this time of year.

That being said February was a very strong month for sales with total units up 11.2 percent. Import nameplates were up 15.5 percent so they outperformed Detroit nameplates for I believe the eight month in a row. Detroit nameplates only grew by 5.9 percent so they lost share. Import nameplates accounted for 55.7 percent of the market YTD,  Year to date total sales are up 13.1 percent. Although sales were very strong in February they still were not back to levels achieved in 2008 pre-financial crisis. We still have a very long way to go.

The story so far this year has been passenger car sales which were up 17.1 percent in February and are now up 22.2 percent YTD. Since Detroit is stronger on truck than on car this is hurting Detroit’s collective market share which is down about 3 points.

Most importantly the SAAR for February was 1.73 million units the strongest since April 2008. This is important because SAARS tend to reduce the gaming of the numbers and is an effective way to neutralize some of the issues mentioned above.

Chrysler for the second month in a row was the top seller of light vehicles in Canada, followed by Ford and then GM. Most don’t remember but Chrysler consistently was the number two seller in Canada during the 1960’s ahead of Ford and behind GM. Canadians have always had a bit of an affinity for Chrysler product. Now that GM is out of the way they have over-taken Ford for the number one market position in Canada. This is going to be a tight battle all year long and don’t count GM out they are in third place but not that far behind the other two Detroit OEMs.

Land Rover, although small in units, is leading the pack with a 52.6 percent increase in sales. Other OEMs with incredibly strong months include Suzuki up 32.1 percent, Toyota up 30.6 percent ( and Toyota is huge so this is quite an accomplishment .. it is easier for a small OEM to grow this fast ), Kia had its 38’th consecutive growth month with sales up 20.0 percent ( amazing performance and could be an all-time record although I have no way to validate this claim since month to month sales reporting is weak previous to the 1980’s), Mercedes Benz including smart and Sprinter was up 16.8 percent, GM recovered from a horrific January and was up 16.0 percent. Audi continues to be the hottest luxury marquee with sale up 16.9 percent.

These are but a few of the biggest winners in February … most companies did very well and a number had record months like BMW for instance. They increased only 2.3 percent but still had a record February. A good example of the issues I started with in this e-mail.

There are a number of issues I will be following carefully this year.

First will be the return of the Japanese. They lost 10.6 points of market share peak to through with their problems. The last half of 2011 they got back 6 points of share…two from each of Ford, Chrysler and Hyundai. This year they are taking share from GM and Ford and Hyundai. This will be real interesting to watch this year. Can the Japanese recover all their lost market share and if so who do they take it from?

Second will be the status of Pick-up truck sales. Traditionally the most stable segment in Canada but was killed in 2008 and 2009 with the financial crisis which hit small businesses very hard. They were artificially low mind you but still very low. During 2010 and 2011 there was a lot of pent up demand and sales exceed all previous norms by a wide margin. This could mean that they come back to earth in 2012 and would be bad news for Detroit OEMs. On the other hand the OIL PATCH is incredibly strong and the guys working rigs love their pick-up trucks and they have the free flow of cash to buy a lot of them. It is just a case of how many do they really need in their driveway … at some point this segment has to run out of steam and come back to earth and when they do Detroit is going to take the brunt of the downside.

Third, will “B” cars buyers return to the market and will they embrace Detroit “B” cars. With the gas price scare in 2008 this segment exploded. But has since come off quite substantially. Some of this drop was due to the simple fact that consumers buying this size of product are also the consumers most hurt by a recession so are not in the market at all. But there is also a strong inference from the data that a lot of consumers who bought this size of vehicle didn’t like them. Not because they were not great vehicles ( there is nothing wrong with a Fit, Yaris or Fiesta ) but because they were JUST TOO SMALL. Whether these consumers come back to the market or not will be critical to the import nameplates AND Ford who have strong products in this segment.

Fourth, will the premium/luxury segments continue to outperform the total market. I believe so but there are some qualifiers. If these segments continue their upward movement all the European brands will benefit big time.

Fifth, will Hybrids/Electrics start to sell again. Sales of Hybrids were down over 20 percent in 2011 … consumers have just NOT accepted them. But this year there are a lot more choices and we have plug-in electric vehicles in dealer’s lots ( three of them ). This class of vehicle is loved by politicians but Canadians have NEVER bought them in any great number. With the possible exception of Toyota product most have been an absolute failure. To meet fuel economy goals it will be critical for these vehicles to start to sell. Hasn’t happened since they were first introduced 12 years ago .. .will it start to happen this year.

Sixth, will diesel products continue to soar. VW and the German Luxury brands can sell every diesel they can get their hands on. Regulators don’t like diesel, consumers love them … who wins this battle.

Till next month.

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