1/6/2015
By Jennifer Coombs

After a surprisingly robust month in November, US auto sales have fizzled out to close out 2014 just under the seasonally adjusted annual rate (SAAR) of 17 million units. Automobile sales in December dropped by 1.7% to close out 2014 with a SAAR of 16.9 million units. North American manufacturing vehicles were especially soft in December, down by 2.9% over last month to a SAAR of 13.6 million, and fell short of consensus’ estimate of 13.8 million. Foreign-made vehicles, namely cars, offset much of the weakness from domestic sales, increasing by 2.8% to a SAAR of 3.3 million units. This report is the first indication, albeit a negative one, for the government’s December report on retail sales.

One item worth noting is that most of the cars sold were, for the most part, negotiation-free, meaning that auto makers were able to sell at relatively higher prices. Effective holiday and end-of-year incentives resulted in sales growth and notable gains in total revenue. It was estimated that the average transaction price (ATP) for light vehicles was $33,168 – up 1.9% from a year ago. Incentive spending increased by only $161 per transaction to $2,900; as a result the ratio of incentive spending to ATP was 8.7% in December, contracting slightly from 8.8% in November. According to the chart below, this ratio has dropped substantially since the early summer when most of the record SAAR for auto sales was recorded.

Among specific auto makers, General Motors (GM) sales surged to sell the most units during December. Year over year, sales at General Motors increased by 19.3% during December; which was significantly higher than the consensus estimate of 13.0%. Chrysler saw sales jump 20% in December, however, it was a bit lower than the 23% surge that was expected. Ford (F) sales increased by 1.3%, which was a bit lighter than the 2.8% gain expected. As the table below demonstrates, virtually all automakers saw year-over-year increases in sales for the month of December. Probably the biggest gainer overall was Volkswagen, which struggled majorly in the first half of the year. VW closes out 2014 with 4.5% year-over-year gains in December.  

Jennifer Coombs
Wall Street Strategies

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