10/2/2014
By Jennifer Coombs

The American consumer simply didn’t keep the car buying pace up as successful Labor Day sales meant a boost in the final weeks of August but less-robust sales in September. Sales of cars and light trucks declined by a sharp 6.3% in September from an abnormally strong August to a lower-than-expected seasonally adjusted annual rate (SAAR) or 16.4 million units. This was below consensus’ expectation for an SAAR of 16.8 million and the 17.53-million SAAR pace from in August. All categories of vehicles showed declines in the month, especially domestic-made cars which fell 9.1% over last year. These sales results point to weakness for the motor vehicle component of the government’s retail sales report in September; this is a component that had been an extremely positive factor for the retail sales report through the whole recovery, but particularly last month when domestic-made auto sales rose 1.5%. The record lows in the price of oil are currently a near-term positive for auto sales as more money in the consumer’s pocket means a greater likelihood they’ll upgrade to a new car model.

In terms of individual automakers, the largest domestic automaker General Motors (GM) posted total September sales of 223,437 vehicles in the United States. This is up a whopping 19% compared to a year ago, and retail sales for GM also rose to 17% year-over-year. Total retail sales for the first nine months of 2014 totaled 1.66 million units for GM. Total Chevrolet deliveries are up 3.3% year-over-year and Corvette sales were up an impressive 231% over last year, which is definitely a positive for luxury brands.

One of the biggest worrisome companies in the domestic space is Ford (F) as sales were down 2.7% over last year – quite a sharp contrast to GM’s robust gains. When Ford laid out its plans for growth for the next several years, one of its major focuses was on Europe due to the weakness of sales in Russia. However, investors should be concerned about Ford sales in Europe as sales outside of America have barely made any improvement since the recession began. The fact that they are slowing in the homeland suggests that something is off in management’s growth plan.  

One company that has started to show marginal improvements is Volkswagen. After struggling big-time in the earlier months, the German automaker is starting to reverse the course of its year-over-year declines to -9.0% in September with a total of 41,221 units sold.

In the monthly race among the luxury brands, Mercedes managed to vanquish BMW in September. Both manufacturers deny the monthly numbers are important; they would rather have more profitable sales than simply increase the volume of cars sold. However, neither can completely hide the value of bragging rights: Mercedes sales in September reached 29,523 up 10.0%. BMW sales were 25,586, or 8.6% higher. Mercedes also holds a slim lead for the first nine months of the year. Year-to-date, Mercedes sales rose 9% to 250,996 and BMW’s improvement was +11.7% to 236,591.

Jennifer Coombs
Wall Street Strategies

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