#Carmageddon Not Yet, But Hot Air Hisses out of Auto Bubble, by Wolf Richter

More disturbing numbers from the car industry. From Wolf Richter at wolfstreet.com:

Despite record incentives, sales decline speeds up, inventory bloat spreads to zombie malls.

Most industry gurus were once again too optimistic with their dreary forecasts for new vehicle sales in the US. Kelley Blue Book had figured they’d drop 3.1% in April year-over-year to 1.45 million units. Forecasts in terms of the seasonally-adjusted annual rate of sales – a key industry metric – ranged from 16.9 million SAAR at Baum & Associates and at Goldman Sachs to 17.5 million SAAR at LMC Automotive. The analyst average forecast was 17.1 million SAAR, down 0.35% year-over-year.

But customers were under sticker shock, and were hobbled by other issues, and what the industry produced was this:

  • Total sales in April fell 4.7% year-over-year to 1.426 million vehicles, according to Autodata; cars sales plunged 11.1% and even truck sales edged down 0.1%.
  • Year-to-date sales, at 5.49 million vehicles, are now down 2.4%. At this rate, this will pan out to be the dreaded “car recession.”
  • Sales in terms of SAAR fell 3% year-over-year to 16.88 million. The pessimists among the forecasters were almost there.

So April had one fewer selling day than April 2016, but this didn’t come as a surprise to forecasters. And SAAR accounts for it.

Note: These are unit sales (deliveries) by franchised dealers to their customers, and by manufacturers to large fleets and to their own employees under their employee programs.

A 4.7% drop in sales, bad as it is, wouldn’t qualify for #carmageddon. These things happen. But here’s the thing: Automakers had shelled out $3,465 in incentives per new vehicle sold, on average, according to TrueCar estimates. A record for the month of April. It beat the prior record of $3,393, set in April 2009. It amounts to about 10% of suggested retail price, similar to March. The last period when incentive spending was at this level of MSRP was in 2009 as the industry and sales were collapsing.

The #carrmageddon point to watch: despite the 13.4% year-over-year surge in incentive spending to nearly $5 billion, total vehicle sales fell 4.7%! When these massive incentives fail to even slow the sales decline, serious problems lurk beneath the surface.

To continue reading: #Carmageddon Not Yet, But Hot Air Hisses out of Auto Bubble

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