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U.S. Vehicle Market Falls 27.7% in June, Smallest Decline of 2009
2 Jul 09
U.S. vehicle sales posted their smallest decline of the year in June, offering hope that the market has reached its bottom and will now begin to stabilise.
IHS Global Insight Perspective | | Significance | The U.S. vehicle market declined 27.7% year-on-year (y/y) to 860,101 units in June, meaning that it was down 35.1% in the first half of the year at 4.81 million units. The June total is lower than the May tally, but the percentage decline is the smallest of the year so far. | Implications | General Motors and Chrysler both saw significant sales declines during the month as fleet sales were voluntarily curtailed, but Ford turned in a very promising performance, its sales down just 10.7% year-on-year. | Outlook | The numbers for June and Ford's relatively strong performance have given many hope that the market is set to stabilise. The "cash-for-guzzlers" programme, however, is unlikely to add more than 150,000 units to the full-year tally. |
Total U.S. Vehicle Sales | | | 2009 | 2008 | % Change | June | 860,101 | 1,189,518 | –27.7 | YTD | 4,810,464 | 7,413,981 | –35.1 |
The U.S. vehicle market posted its smallest decline of 2009 in June, falling 27.7% year-on-year (y/y) to 860,101 units. Although this total was lower than the tally for May, when sales topped 900,000 units for the first time this year, the smaller percentage decline from the year-ago period has offered hope that the market has reached its bottom. During the year to date (YTD), the U.S. market has fallen 35.1% y/y to 4.81 million units, as the recession enters its 20th consecutive month. The big story during June concerned Ford, which posted a relatively minor 10.7% y/y decline to 154,873 units (down 34.1% to 773,242 in the year to date). The company recorded a significant increase in market share, posting record sales of the Ford Fusion, Flex, Escape, Expedition, and Ranger models. "We're making steady progress and are firmly focused on our plan to build a sustainable and exciting Ford", said Jim Farley, Ford group vice-president of marketing and communications, in a conference call with the media. "We remain grounded, however, given a challenging industry and economic conditions." The company posted some significant gains for its newly redesigned models and also witnessed an increase at its Volvo brand, which eked out a 0.6% y/y gain. U.S. Light-Vehicle Sales by Group | Group | June 2009 | June 2008 | % Change | YTD 2009 | YTD 2008 | % Change | GM | 174,785 | 262,329 | –33.4 | 947,518 | 1,589,235 | –40.4 | Ford | 154,873 | 173,462 | –10.7 | 773,242 | 1,172,521 | –34.1 | Toyota | 131,653 | 193,234 | –31.9 | 770,447 | 1,240,087 | –37.9 | Honda | 100,420 | 142,539 | –29.5 | 530,778 | 798,358 | –33.5 | Chrysler | 68,297 | 117,457 | –41.9 | 471,197 | 867,826 | –45.7 | Hyundai | 64,788 | 78,325 | –17.3 | 352,090 | 388,685 | –9.4 | Nissan | 58,298 | 75,848 | –23.1 | 347,744 | 522,322 | –33.4 |
General Motors (GM) and Chrysler did not fare as well in the difficult market, with Chrysler coming out of bankruptcy in early May and GM spending the month in Chapter 11 status. GM maintained its market-leading position despite a 33.4% y/y decline to 174,785 units (down 40.4% y/y to 947,518 units in the YTD), while Chrysler posted a more significant 41.9% y/y decline to 68,297 units (down 45.7% y/y to 471,197 units in the YTD). Both companies dramatically curtailed fleet sales during the period as plants were shuttered; companies typically record fleet sales as a percentage of production, and with production largely stopped, fleet sales fell accordingly. GM pointed to some better numbers in the retail market, having posted a 20% boost in retail car sales and a 13% jump in retail crossover utility vehicle (CUV) deliveries. Pontiac and Chevrolet did decent business, with some models such as the Camaro posting surprising numbers (over 9,300 Camaros were sold in June, with a seven-day supply). Chrysler posted some retail sales gains as well, citing y/y increases for the Challenger, Ram, Jeep Liberty, and Dodge Journey. The rest of the market fared similarly poorly, however, at least in comparison with the year-ago period. The Asian automakers all experienced significant y/y declines, with Toyota sales falling 31.9% y/y to 131,653 units (down 37.9% y/y to 770,447 units in the YTD), Honda sales down 29.5% y/y to 100,420 units (down 33.5% y/y to 530,778 units in the YTD), and Nissan sales declining 23.1% y/y to 58,298 units (down 33.4% y/y to 347,744 units in the YTD), putting it even further behind a relatively better-performing Hyundai. Hyundai continued its trend of relatively better numbers with a 17.3% y/y decline in June to 64,788 units (down just 9.4% y/y to 352,090 in the YTD). Outlook and Implications The seasonally adjusted sales rate (SAAR) for June came in at 9.655 million units, not far off IHS Global Insight's estimate of 9.5 million units, but well below many other analysts' estimates of 10 million units. In comparison, the year-ago SAAR was 13.69 million units, with 1.19 million units sold in the month. However, even then, the beginning of the falling trend was starting to appear, with only Honda posting a gain in June 2008 out of the top six automakers. Record-high fuel prices were pushing people towards cars rather than trucks, but they were also starting to drive people out of the market entirely as demand for even used trucks dried up and consumers found that their sport utility vehicle (SUV) loans were upside-down. As a result, some of the numbers for the Asian automakers are a bit skewed given that they enjoyed record sales months in June 2008, and today's sales environment is considerably different. That said, they are still not doing terribly well, given that demand for just about all vehicles has slackened considerably. However, the real surprise breakthrough seems to have come at Ford. As expected, the company is reaping the benefits of its decision not to accept the same level of government help and intervention that GM and Chrysler have. It is reasonable to assume that those looking to buy U.S. brands are turning to Ford instead of GM and Chrysler, given GM's bankruptcy status and the largely uncompetitive line-up being fielded by Chrysler (with a few exceptions, such as the Challenger, Journey, and minivans). Ford is also proving its worth, however, winning over additional consumers with what are frankly some of the best products the company has had in the U.S. market in decades. The new Taurus is winning praise from several quarters for its styling, and the new Fusion sedan (with its novel hybrid model) is also garnering a decent amount of attention. Ford's market share for May was a full two percentage points higher than it was for May 2008, a considerable achievement. Given the pace of new product introductions at the company, and the kinds of products that are in the pipeline for the next two years, its market share looks set to continue to climb. Given the overall June market performance and the newly passed "cash-for-guzzlers" bill, IHS Global Insight has increased its forecast for full-year 2009 sales to 9.83 million units, up from 9.7 million previously. The "cash-for-guzzlers" programme is expected to add no more than 150,000 units to the total over the rest of the year, a small impact due to the limited scope of the scheme. Given that the scheme's requirements as to what can be accepted as a trade-in are fairly strict (cars must be under 18 mpg, less than 25 years old, owned and insured by the same person for over a year, and worth less than the US$4,500 maximum voucher), the actual number of people who will qualify for the programme and have the means and desire to assume additional debt for a new car purchase is smaller than generally thought.
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