September Auto Sales Weaken as Clunker Effect Ends

The U.S. auto industry witnessed waning auto sales during September as the U.S. Government’s "Cash for Clunkers" program (hereafter, CFC) ended its run in August. The CFC was a $3 billion cash incentive program, introduced in late July and ended August 24. The program allowed consumers to trade in their old gas-guzzling cars and trucks with a mileage of 18 miles per gallon or less for a value of up to $3,500-$4,500. The CFC drained out auto dealers’ inventories and sucked up potential September sales.

Overall industry sales went down 26% year-over-year to 742,099 vehicles. This made September the worst month since February. Sales of cars and light trucks dipped 25% to 555,798 vehicles.

Korea’s Hyundai Motor was the only automaker to report a sales gain in September. The automaker’s sales surged 27% amidst slowing market for delivering low-cost and high-quality vehicles. Two of its models -- Sonata and Elantra -- were among the top-20 selling vehicles by volume.

Among the U.S. automakers, the Ford Motor Co. (F) reported the best results. The automaker’s sales dipped only 5% despite low inventories and reduced incentives for buyers. The Ford F Series Pickup ranked first in the top-20 selling models. Other Ford models that featured up in the list are Fusion, Escape and Focus.

Other Detroit automakers were hit the hardest during the month. Sales for General Motors and Chrysler plunged 45% and 42%, respectively. Sales of both the automakers suffered due to a weak product portfolio.

Meanwhile, U.S. sales for the three major Japanese automakers -- Toyota (TM), Honda (HMC) and Nissan (NSANY) -- succumbed to the short-lived CFC boom. Their sales were lower in September after the substantial spurt in August.

Toyota Motors revealed a 13% fall in sales during the month. The automaker had the largest number of Clunkers-related sales. Toyota Camry ranked second in the top-20 selling models. Other models that showed up in the list are Corolla, RAV4 and Prius.

Honda Motor Co. disappointed with a 20% drop in sales compared to its best performance in August among the three major Japanese automakers.

Nissan Motor recorded a 7% decrease in sales. This was worse than its sales decline in August.

We believe U.S. automotive market will remain spare for the remainder of 2009. Inventories need to be revamped through the ramping up of production. It will not be possible for the industry to witness any major breakthrough unless another CFC kicks in.

Comments

[Mark Bern:]

Buyers are also wary, not only of the potential for Chapter 13 for GM and Chrysler, but also because of all the dealers getting closed down. Is this all of the consolidation that will happen? Or will there be more closing in the future? Who will perform the warranty work? Will I have to drive to another town or city just to get my obsolete car worked on?

All of those questions may seem ridiculous, but one or more pop into the minds of potential buyers. They will just sit tight and wait until the dust settles before jumping back in. Of course, getting a job might help a little, too.

Oct 05 06:53 PM

[Mad Hedge F...:]

ihn Was that nice for you, dear? Now that cash for clunkers has expired, new car sales have cratered. September is coming in at a 7 million unit run rate, lower than before the program started, and down 24% from already depressed YOY levels. It really makes you wonder what will happen when the other government stimulus programs run out. The $8,000 tax credit for first time home buyers ends November 30, and unless you have a deal in contract, the program is effectively over. That is thought to be behind the recent weakness in new home sales, the biggest beneficiaries of the program. Is this the beginning of the “square root,” or the “W.”

Oct 05 07:23 PM

[The Geoffster:]

On Oct 05 07:23 PM Mad Hedge Fund Trader wrote:

It really makes you wonder what
> will happen when the other government stimulus programs run out.
>
Don't tease us. Show us.

Oct 05 10:08 PM

[BullnBear:]

I sure do hope that the end of the clunkers program and a slow down in auto sales doesn’t come as a big surprise to anyone.

Oct 06 12:15 AM

[casey00001:]

The guy with the big ears on Pennsylvania Avenue might be a little surprised. What's the next gift to his union cronies?


On Oct 06 12:15 AM BullnBear wrote:

> I sure do hope that the end of the clunkers program and a slow down
> in auto sales doesn’t come as a big surprise to anyone.

Oct 06 04:37 PM

[BeachRider:]

Wow, Chapter 13. Didn't they just come out of Chapter 11? Are people really expecting re-entry into Bankruptcy?

FWIW, Edmunds is projecting that GM's market share will climb from 19.1% to 22.4% in October. They are getting a larger share of a smaller pie.

And unemployment in Detroit still hovers around 35%

Oct 16 01:03 PM