7/2/2014
By Jennifer Coombs, Research Analyst

There’s a lot to be said about the improvement in weather and its link to auto sales. The increase in fuel costs from the past few weeks due to concerns in the Middle-East hardly had an impact on American automobile sales for the month of June. Motor vehicle sales reached their highest level in June since July 2006 as overall sales increased to a seasonally adjusted annual rate (SAAR) of 17.0 million from 16.7 million SAAR in May. We were actually really surprised by the strength of gains in June. A month ago, we noted that seasonal swings and large discounts, which are usually associated with Memorial Day, were thought to have artificially inflated sales in May, so we expected a natural pullback in June. Oh, how wrong we were! Year-over-year, sales increased 1% in June, but we should note that this small gain is a little deceiving since there were only 24 calendar business days in June 2014 compared to 26 business days in June 2013. Even with two fewer days, sales were still impressively higher over last year.

This is ultimately great news for American manufacturers and consumers, both of which were slow to start from the beginning of the year. Domestic sales increased to 13.5 million SAAR in June from 13.3 million SAAR in May; this was the best month for domestic producers since January 2006. Additionally, domestic car sales increased to 5.9 million SAAR from 5.7 million SAAR, while domestic truck sales showed a modest decline, from 7.7 million SAAR to 7.5 million SAAR. We note that the decline in trucks isn’t that substantial since the demand for truck production continues to be high at major freight companies. For imported autos, sales increased to 3.53 million SAAR from 3.44 million SAAR, making June the strongest month for imports since November 2013.

The numbers are even more impressive when you break down the monthly sales by maker. General Motors (GM) managed to maintain its huge market share, despite news of further recall-fueled turmoil and the possibility of even more recalls going into the summer. During June, GM increased sales by 1.0% to 267,461 vehicles total. GM’s closest domestic competitor, Ford (F) saw sales fall 5.8% over last June, and its sales are now down 2% year-to-date. Japanese manufacturers were mixed: both Nissan (5.3%) and Toyota (3.3%) gained market share in June, but sales at Honda fell 5.8% over last year. German auto makers were also rather mixed: Volkswagen continues to be the biggest disappointment, so far in 2014 its sales fell 22% year-over-year. The numbers were worst than its year-to-date figures — a decline of 13.4% to 179,144. However, Audi sales improved by 23.1% over last year with 16,867 units sold. In addition, German makers Mercedes-Benz and BMW also increased sales by 8.2% and 11.5%, respectively. This pop is also encouraging for a comeback in luxury brands as Porsche sales also increased by 10.9% over last year.

Overall, year-to-date sales are up 4% for the first half of the year, and if the sales continue at the first half’s pace, a total of 16.3 million vehicles will be sold in 2014. This would now mean sales are on track to come in higher than consensus expectations for 2014, which were 16.2 million at the beginning of the year. Ultimately, this is an encouraging turnaround in auto sales going into summer, especially with gas price worries still in the foreground.

Jennifer Coombs
Wall Street Strategies

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