Car Sales Dip 3.5% in October, Domestic Down 5.2%

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Car sales in October were unexpectedly weak. Domestic car sales were even worse.

Economists polled by Econoday expected October car sales to fall to 17.0 million unit at a seasonally-adjusted annualized rate (SAAR).

Instead, sales dropped to 16.5 million units from a revised lower 17.1 million (originally 17.2 million) September reading.

Domestic sales fell to 12.7 million units SAAR from 13.4 million units.

Highlights

Unit vehicle sales, at a much lower-than-expected annual rate of 16.5 million, proved very soft in October and will lower expectations for next week's retail sales report. October's pace is the slowest since April reflecting sharp slowing in light truck sales. Vehicle sales have been soft this year, averaging a 16.9 million pace versus 17.2 million and 17.1 million in the two prior years. Despite this, 2019 has been a good year for overall consumer spending and is the fundamental reason why the Federal Reserve stepped back last week from signaling any further rate cuts.

Analysts Missed the Mark

On October 29, the Detroit Bureau reported Analysts Predict October New Car Sales Will Rise Slightly

Even with the long strike by the United Auto Workers cutting off delivery of new vehicles to General Motors dealers nationwide, overall sales of new vehicles have remained on a steady course during October, analysts report in monthly sales forecasts.

Cox Automotive is predicting that during October, new light-vehicle sales, including fleet, will reach 1.37 million units, up about 2,000 units or 0.2% compared with October 2018. When compared to last month, sales are expected to rise nearly 87,000 units or 6.8%.

The SAAR in October 2019 is estimated to be 16.9 million, down slightly from last month’s 17.2 million level and down from last year’s 17.5 million-unit pace. This October has 27 selling days, one more than last October, and four more than last month, according to Charlie Chesbrough, senior economist at Cox Automotive.

Affordability issues, a result of higher interest rates and higher vehicle prices, are leaving many potential new-vehicle buyers out of the market.

Fleet activity, which has been very strong in 2019, as it was in 2018, is the key unknown for October’s sales performance. Worsening economic news and aggressive fleet activity earlier in the year suggests some pullback should be expected, Chesbrough said.

GM Sales in China Slump

On October 10, the Detroit Free Press reported GM's China Sales Continue to Slump in Third Quarter as US Automakers Lose Market Share.

General Motors' sales in China fell by 17.5% in the third quarter from the same period in 2018, the company's fifth consecutive quarterly decline in the world's largest auto market.

The company said it delivered 689,531 vehicles in China during the period "in the midst of the continued soft vehicle market."

4th-Quarter Rocky Start

  • Vehicle Sales Down 3.5%
  • Domestic Sales Down 5.2%
  • Sharp slowdown in light trucks.

The light truck category includes SUVs.

It remains to be seen how much the GM strike affected these numbers.

What's clear for now is that fourth-quarter retail sales and GDP are off to a rocky start.

Mike "Mish" Shedlock

Comments (32)
No. 1-15
Sechel
Sechel

I think the auto-makers are in trouble. Millenials and people in large cities are giving up cars. Average age an auto keeps rising too. Personally I'm now driving the same car for 14 years and see no reason to replace it. I maintain it, it works like new. I'm an auto-makers worst nightmare.

numike
numike

buy low? UT Housing Prices Crater 21% YOY As Desperate Sellers Stamp Their Little Feet As Utah Housing Market Tanks

Tony Bennett
Tony Bennett

TrueCar last week predicted 16.6 million SAAR ... blamed slow down on GM strike and less incentive $$s than September.

Tony Bennett
Tony Bennett

Unexpectedly.

That word. Again.

Tony Bennett
Tony Bennett

"What's clear for now is that fourth-quarter retail sales and GDP are off to a rocky start."

...

I will be very interested following the Holiday Retail Sales this year. NRF predicts +3.8% to +4.2% over 2018. Thanksgiving falls on the latest possible date shrinking the time between BF and Christmas. Sales volume may well reach target ... but at what cost (to margins)? If Sales are too good to pass up ... likely for a reason (move that durn inventory!).

Solon
Solon

It has no bearing on this quarter's vehicle sales, but one thing I think was missing from your latest Automated Taxi article, Mish, is the effect that automated driving is going to have on automobile manufacturer revenues. And insurance revenues.

I think Ride on Demand is going to be a big thing in the future. One would think this is deflationary with respect to vehicle pricing and insurance. No need for a "cockpit", more passenger/cargo space etc. .Obviously there will still be large fleet sales, at least initially, as providers accumulate vehicles to meet the demand for rides. But over the long run?

And as automated driving should be far safer, the effect on insurance companies' bottom lines should be obvious. (And certainly deflationary with respect to traffic ticket profiteering).

But then again this might be offset by an impetus to move these fleets to electric as batteries are damn expensive.

Still, I cannot see the churn in vehicle ownership being as great in the future as it has been.

Greggg
Greggg

More driver-less vehicles piling up in inventories.

caradoc-again
caradoc-again

The Fiat-PSA tie-up to make global #4 is a sign of the times. Expect a cull in headcount no matter what they say currently.

A whole host of industries feed automotive and it looks like a grind down that has no sign of changing direction.

caradoc-again
caradoc-again

Watch out oil majors.

The time will come when either there will be a push for ICE scrappage (cash) to spur EV replacement demand or ICE's are seen as a good tax target. Climate will be used as the excuse and Govs will see it as a way to drive industry out of a funk and raise $.Oil will pay the price and move job losses there.

shamrock
shamrock

We are only 1 month in but the GDPNow is at 1.1 and Nowcast is 0.8. That's pretty bad.

magoomba
magoomba

We are heading into a used car shortage as well. A lot of the newer stuff will be rendered non viable.

FromBrussels
FromBrussels

....and yet, today, the Dow reached an all time high, and so did eurostoxx 600..... Cheap debt driven irrational exuberance ?

Six000mileyear
Six000mileyear

This is a major trend change underway.

Country Bob
Country Bob

(1) To the extent that car quality improved post 1980 (after taking a major dive in the late 1960s), one would expect the constant churn of new car ownership to slow down as better cars last longer.

(2) A lot of millennials cannot afford new cars, they can't even afford to move out of their parents basement. Many "modern" college degrees are worthless -- as we see so many grads taking jobs that don't require a college degree. Millenials have resorted to buying fancy smart phones as a new "keep up with the Jones" wealth indicator. This trend has been well documented in many places. Out of control formal education prices are displacing discretionary spending.

For older generations (and millenials will confront this soon), there is a forced diversion of free cash flow toward the failed health care system. Out of control healthcare prices eliminates a lot of discretionary spending.

The trend toward seven year car loans reflects way too much money being sucked up by education and health care.

(3) Used cars don't depreciate as much when you drive them off the dealer lot. Used cars bottom out on the 3rd world roads that dominate many large US cities just as well as a new car -- but the bottoming out doesn't cost as much.

Used cars have lower insurance premiums, which frees up cashflow to pay crazy education and healthcare prices.

Obamacare was a spectacular failure, on top of what was already an overpriced health care system. Colleges issue tax free debt, pay no taxes on income or property, and get heavily subsidized vendor loans (student debt) to warp their prices higher -- and yet they still deliver a flawed product with very marginal value. Even the "ivy leagues" are churning out grads with marginal employment prospects (daddy could have used his connections on getting junior a decent job instead of admission).

Too many people can't afford a new car even if they want one.