18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
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U.S. Auto Sales Are About to Dump Out

One of the major economic indicators that have proven to be worthy of investor attention is auto sales. Generally speaking, we all have one and we tend to buy new one’s when we feel good about the economy. During the 2008 financial crisis, home sales plunged by double digits — sending GM and F to the government with a tin cup — begging for bailouts.

While this downturn doesn’t seem to be that bad, it’s still negative growth at a time when the Fed is in the midst of a fucking insane hiking program.

According to JD Power and LMC Automotive, US sales fell by 2% in June, in spite of large discounts.

June U.S. new vehicle sales will be about 1.48 million units, a drop of 2 percent from 1.51 million units a year earlier, the consultancies said.

The forecast was based on the first 15 selling days of the month. Automakers will release June U.S. sales results on July 3.

The seasonally adjusted annualized rate for the month will be 16.5 million vehicles, down nearly 2 percent from 16.8 million units in the same month in 2016.

Retail sales to consumers, which do not include multiple fleet sales to rental agencies, businesses and government, were set to decline more than 1.3 percent in June.

U.S. sales of new cars and trucks hit a record high of 17.55 million units in 2016. But the market has begun to saturate thanks partly to a glut of nearly-new used vehicles, forcing automakers to hike incentives to entice consumers to buy.

This is the third consecutive month of declines for the autos. Investors should be paying attention to this.

“As the U.S. auto market enters the fourth month in a row of a sub-17 million unit selling rate, nerves are being tested,” Jeff Schuster, senior vice president of forecasting at LMC Automotive, said in a release. “It will be challenging in the second half of the year to keep pace with 2016 … but a year still expected above 17 million units should not be considered a poor performance.”

The consultancies said consumer discounts averaged $3,661 per vehicle, a record for the month.

Discounts as a percentage of the manufacturer’s recommended sale price remained at 10 percent in June, a level industry experts say is unsustainable.

Inventory levels at major automakers have also raised concerns.

The average number of days a new vehicle sits on a dealer’s lot before sale remained at 70 through the first 15 days of June.

Year to date, TSLA is +79%, while F, GM, HMC and TM are flat to down 9%.

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  1. roundwego

    Auto gas been credit zed to death with uber fuelling auto supply. The death of cab industry and surge in personal cars in hopes to make money on uber. But those hoped dud not pan out for the milenials who default on their student loans and dump the lease on their cars. Uber and auto are in an experimental bubble. And people will recongize the scam soon enough.

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  2. heaterman

    The simple fact of the matter is simply that fewer and fewer plebs have the funds available for a down payment let alone servicing the loan or lease long term.
    Until wages begin to rise or vehicle prices are reduced, this will only get worse.
    No one wants to drive a stripped down little shoebox sized car but that is all many can afford.
    Demand is there because I see many beaters on the road these days. Their owners proudly display multi hued door panels and fenders scavenged from junkyards in an effort to keep the old chevy 1/2 ton intact for another year.
    Because that’s all they can afford to do.

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    • matt_bear

      Absolutely agree. A decent new car is a $500 monthly payment. Average person doesn’t have that. End of story.

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  3. fxtradepro

    Housing is the indicator I’ll pay closer attention too. Auto sales are luxuries, but if you couple declining sales with repos/defaults, that’s when things turn ugly. Which could be on the horizon given the subprime auto loans dolled out post crisis.

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  4. derp

    I drove to Alaska from New York in 2005 just for the fucking hell of it.

    There’s a massive auto graveyard in Saskatchewan. Literally the middle of nowhere. It stretches to the horizon and back.

    Now think about how many new cars roll off the line every year. There’s no fucking way that many people buy a new car every year.

    Cars should be made to order. Anything else is just profligate fucking waste, sweet jumping Jesus.

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  5. 'merica

    I’ve been looking to purchase a minivan, against my best judgement, for the family. Drove to the lot to see where prices were at. Out of nowhere, a thirsty salesman was behind me asking me questions.

    All of the sticker prices had been removed and all that was left was the MSRP. I asked the young buck, what is the going price for these vehicles. He spoke around the question and proceeded to talk up the features of the glorious minivans.

    My wife said she needed feature x and y and z. I said in my head “shutup, shutup”. I told the young man thanks for the information, we will check back later.

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