USA 2012 car industry: Titan or Titanic?

The US Auto market touched a low peak in 2009 at 10.4 million units. Then progressively recovered and in the first quarter 2012 sales volume at 3.465.000 were over 400.000 higher than the previous year., posting a 13.3% increase. The March SAAR was at 14.4 million and is projecting a full year very positive, better than expected by all analysts.

Now, the questions are: “How much this trend is “real”?” and “How long the trend will continue?

We at focus2move.com have analyzed the USA economic environment and checked data as far as those considered the “Automotive Sector Key Factors” in order to find answers to these questions and define a next months realistic scenario. Among the rest,  we have analyzed data regarding level of inventory,  discounts and fleet sales mix.

In March Manufacturers have slightly increased the dealer’s inventory, with actual average at 53 days, 12% higher than last September, when stock peaked at lower level in last years. The inventory increase depends by normalization of Toyota (and Scion) stock while American’s Brands stock is now higher than average. High stock level is also showing that Nissan, Suzuki and Mazda are struggling to maintain sales performance, while Hyundai is performing well in spite short supply.

In the table below, the Top 5 Highest and the Top 5 Lowest brands as inventory days of stock.

Rank

Brand

Days stock

 

Rank

Brand

Days stock

 

 

 

 

 

 

 

1

Chrysler

95

 

5

Audi

28

2

Nissan

94

 

4

Honda

28

3

Lincoln

82

 

3

Hyundai

28

4

Suzuki

79

 

2

Mitsubishi

28

5

Mazda

77

 

1

Subaru

23

USA Market Average Discount index at 11.3% in February was the highest since August 2011, but was 2.2 points below February 2011, The current level should be considered inside profitability level for booth OEMs and Dealers.

Last year spring Japanese suffered short supply due to the Tsunami in Japan. All others competitors took benefit from the reduced competition and were able to gain market share while reducing discounts. Now the competition is back at its normal level.

Looking at single brands, the highest discounts are offered by the Detroit Big3, as tradition. Lincoln seems to struggle under German Luxury brand aggressive policy and is pushed to maintain a very high discount level close to 15.0. To be underlined the fact that BMW and Mercedes are at 11.4, quite high level for Premium brands.

Volkswagen Group with Audi and Volkswagen brand continue to be among competitors with lowest level of discount. Scion is leading this category, offering only 2.1% rebate and standing stick to its strategy of aggressive visual price very close at final transaction price. In the table below, the Top 5 Brands as high and low discount index:

Rank

Brand

Discount Index

 

Rank

Brand

Discount Index

 

 

 

 

 

 

 

1

Ram

15.7

 

1

Scion

2.1

2

Lincoln

14.9

 

2

Subaru

6.1

3

Ford

14.1

 

3

Audi

6.2

4

Chevrolet

13.9

 

4

Mini

6.3

5

Chrysler

12.7

 

5

Volkswagen

6.8

The lease market is a key indicator of level of “push” in the market, representing not only the “company cars” demand. In facts, OEMs are able to influence this sector purchase, in the short term. The good news is that in March only 21% of USA industry was “Lease” and this level was 5 points below a year ago and stable on previous months.

Among competitors, Lincoln is pushing sales in this segment above the normal level, while level achieved by Smart (53%) looks unbelievable for this product. From the other side, while it is normal finding a low lease mix for Korean’s and Japanese’s brands, a good news is represented by Ram and Dodge low lease mix.

In the table below, the Top 6 brands as high and low lease mix:

Rank

Brand

Lease mix

 

Rank

Brand

Lease mix

 

 

 

 

 

 

 

1

Infiniti

59

 

1

Suzuki

4

2

Smart

53

 

2

Ram

7

3

Lincoln

47

 

3

Dodge

9

4

Acura

46

 

4

Scion

13

5

BMW

43

 

5

Kia

14

6

Mercedes

43

 

6

Toyota

15

As conclusion our answer to the first question: the USA market growing trend is based on solid consumer demand and is not related to push activity applied by car manufacturers. Actually, customers are spontaneously visiting dealerships to buy a new car in spite of car makers are working in a safety profitable manner, maintaining the discounts level inside their economic limits and producing profitable sales.

How long this trend will continue?

The USA economy is recovering, but the car industry has already exceeded the normal growth related to the Economic Factors. In the current market demand there is also a component of post-crisis effect. In the period 2008-2010 many potential customers have preferred to postpone a vehicle purchase due to the uncertain economic environment. Now the future looks more stable and those waiting for this climate are back to purchase. Their numbers are on top of “normal” clients with an effect focus2move.com estimates in 0.5 million units on 2012.

However global financial recession will obstacle USA economic recover and in 2013 the market forecast are for a slight decline over this year. The 14 million level, with a range of half million up or down should remain the USA market anchor until 2015.

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