Did New Car Sales Bottom in November?

AutoLine Reports

Yes, car sales look terrible for December. But that’s if you compare sales to the same month a year ago. The market has changed so much from then that I would argue you can’t get an accurate read on what’s going on right now, if you’re only measuring today’s sales against 12 months ago. A better gauge is a running average over the last 6 months. Car sales are in a terrible state, but the bottom may actually have been reached in November. In fact, sales were up by nearly 150,000 units or nearly 20% in December vs. November.

January could be better. GM (GM) and Chrysler received the first installments on their bridge loans, which instilled some level of confidence in the market. GMAC received TARP money which will help stabilize quite a number of dealers. GM immediately began offering low interest loans and resuming national television advertising.

That’s not to say the market is on a rebound. But it may well be that we hit the low point two months ago and are starting to inch up

So, for my investment in AutoNation (AN) and Berkshire's (BRK.A) Warren Buffett's investment in CarMax (KMX) this means the 10,000 year flood may have crested and may be receding. What is left? Over a thousand fewer dealers, pent up demand and and TARP backed loans from the automakers.

Of course it is early to tell if this is a one month anomaly or a trend but this is certain, it is the first sign of good news in some time.

AutoNation CEO Mike Jackson will update investors at the end of the month when earnings are released. Expect earnings to be dismal, what is important is what he says about the current environment and what he sees going forward.


Disclosure: Long AN

Comments

[malach hamo...:]

Unemployment is still rising; real credit is still being doled out a lot more judiciously; and the ups-and-downs of gas prices still troubles lenders' projections of residual values of low-mileage trucks & suvs. Add the end of "aspirational buying" as a means of self-expression and the greater availability of auto mechanics who've been laid off by dealers, and you find that more owners will hold on to cars that still run fine, and won't feel the need to buy just to prove something to their neighbors (especially the guy across the street who was just laid off by Citibank).

A return to 16million cars per year is a way off.

Jan 07 06:12 AM

[Jonas:]

Sales will be down. People are still scared of taking extra credit. Nevermind the low rates. More credit in a time when jobsecurity is low is just not done. Expectations about more incentives in march from the industry topping 3500 instead of the 800 now are high. The second hand market is performing much better, witch influences the new car market. The consumer can only bye one car at the time.

Jan 07 06:12 AM

[The Hammer:]

The days of $99 and a job are over for a long time. New car sales will stay down imo off of peak build rates for a long time too. The thing to look for here is the number of dealerships that continue to close shop. The one down the street from me closed recently and consolidated operations into one building as opposed to two.

Jan 07 08:19 AM

[fatcat:]

Traditionally,dealers depend on tax refunds to boost sales in the first part of the year....the big question this year is whether those refunds will go to pay down debt or even living expenses for the unemployed.

I need a car now,myself,but I'll wait until things become more stable and maybe prices come down.Who knows...

Jan 07 09:05 AM

[notsosmart:]

maybe the dumb-dumbs are waking up to the fact that buying a piece of metal/plastic that loses $1000-5000 as it is driven out of the dealership is not such a great idea.i drive a 18 yr old caprice.it cost $18,000.so my cost is still $1000 @ year.with unemployment going up i dont see great car sales.i have a great good ,honest mechanic that doesnt charge dealership prices to maintain this vehicle & i can see whats going on anytime i want.

Jan 07 11:46 AM

[Paul Price:]

The recently released December sales figures have answered an
emphatic- NO!

Even Toyota and Honda are having trouble selling right now.

The former Big Three seem to have almost no chance to recover. The bailout is simply delaying the inevitable while taking taxpayer money and transferring it to the UAW.

Jan 07 07:29 PM