A rapid recovery in the North American auto industry eludes most light vehicle manufacturers. The automotive production recovery is likely to be protracted with modest gains until the first quarter of 2012. Best sales and production results will be for well-executed new/replacement vehicles, particularly small- and mid-size cars and cross-overs. Overall, expect reductions in releases to balance demand and supply of slow selling light vehicles.
A rapid recovery in the North American auto industry eludes most light vehicle manufacturers. As clearly shown in the latest results from the APMA Industry Tracker, US light vehicle sales for June 2011 were extremely low. This result was expected and published in the APMA Market Intelligence Program production outlook and the AutomotiveCompass Newsletter. As reported by Ward's Automotive, the June US SAAR was just 11.4 mil., well off the estimates from most of the forecast community. Actual US light vehicle sales were just 1.05 mil.
The uncertain economic environment (employment growth, house prices (wealth), gasoline price expectations), lower consumer and business confidence (stalling expenditures), high vehicle prices (with price creep and clever packaging to boost margins and manage shortages), comparatively low incentives (5 yr. low), and product shortages (following the Japanese Crisis) all contributed to the poor retail and fleet sales results in June. Importantly, all key drivers were weak. Overall, inventory grew 10% month-over-month; Detroit 3 inventory grew 12%.
Canadian light vehicles sales played catch-up in June, but six months CYTD sales are up just 2.6% vs. 2010.
The collision between soft demand and strong production, in the presence of a high inventory level, is likely to force a lowering of production plans and higher incentives for the balance of 2011. Inventory levels are growing too fast for many vehicles and brands. Expect reductions in releases to balance demand and supply. Incentives will accelerate again.
By implication, the automotive production recovery is likely to be protracted with modest gains until the first quarter of 2012. Best sales and production results will be for well-executed new/replacement vehicles, particularly small- and mid-size cars and cross-overs. The near-term will not be a case of broadly balanced, high growth.
The 2011 NAFTA production winners will be Chrysler, Hyundai, BMW, Fiat Group, and Volkswagen.
To learn more, the APMA Industry Tracker and integrated Market Intelligence Program are available to APMA members. Call Vince Guglielmo for more information on data access.
Your comments and questions are welcome.
William Pochiluk, AutomotiveCompass
1-877-474-8743
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