U.S. March Auto Sales Results Are a Warning to Industry

By Brendan Moore

04.02.2008

The retail sales results in the U.S. from March from all the auto manufacturers came in yesterday, and the news was depressing. Sales were down 12% to 1.36 million vehicles. Since March was the end of the quarter, quarterly results are in as well, with that number ending up at an 8% decline from last year, with 3.58 million units going over the curb in the first part of 2008.

Multiply that quarterly number by 4 and you get a trend rate that equals 14.3 million units for the year.

Let the quarter stand by itself, and multiply March’s volume by the 9 more months left in the year, and you get a run rate that says 12.24 million more vehicles will be sold in the rest of 2008. Adding that to the first quarter results gives you a total of 15.82 million vehicles sold in 2008.

Auto industry analysts believe that sales in the U.S. will be substantially lower this year than previous years, with estimates of annual sales anywhere from 14.5 million units to 15.5 million by the time 2008 is over. There are a very small number of projections that come in even lower; citing the possibility of a deep recession in the U.S. economy, but the consensus is for a sales number somewhere in the 15 million range.

Whatever your guess within that range, it’s going to be lower than the 16.1 million units sold in 2007.

The retail auto industry is getting hammered by a confluence of forces that are conspiring to make life difficult for almost every manufacturer.

Consumer credit has tightened considerably, with even higher credit requirements on the way. A credit underwriter I spoke with at an auto finance corporation told me yesterday that “our credit guidelines have been screwed down so tight they squeak”. It doesn’t matter to a consumer if interest rates are low if you can’’t get approved.

The mortgage fiasco and the subsequent foreclosure panic are not making anyone feel better, either. Even if you’re in good shape personally in terms of your finances, it certainly gives you pause when you look around at all the havoc in the economy. It makes everyone a little nervous.

And, finally, the rising price of gasoline is doing two things: it’s taking money out of household budgets that could be used for a down payment on a new car and putting it into gasoline purchases, and it’s absolutely killing sales of trucks and SUVs since at least some percentage of the United States has now decided that gasoline will not be going down in price anytime soon, if ever, and are buying accordingly. Small, fuel-efficient cars were just about the only bright spot in the March sales results, and the automakers that had that type of vehicle in their lineup, and conversely didn’t have a lot of trucks in their lineup to drag down their overall results, did well in March.

The car companies have to look at March and wonder to themselves if the rest of the year is going to look like last month, or if things will get a little more positive towards the end of the year. If the national economy tips over into a full-blown recession, March could end up being the template for 2008.

Everybody buckle up – it’s going to be a rough ride.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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5 Comments

  1. News flash-we are in a recession right now. The only question is how deep and for how long.

    And here’s another news flash-gasoline will be four bucks a gallon by the end of this year, you can count on it. Where it goes from there is anyone’s guess.

  2. I’ll see your four dollars and raise you 50 cents.

    $4.50 BY JAN 1

  3. That rumoroed four-cylinder Camaro is starting to look a little more attractive…

  4. I agree w/ market hawk, we are in a recession without a doubt. And since that is a fact, 2008 is going to a bad year for auto sales among other things.

  5. Four bucks a gallon by the end of the year!?!?!

    It’s gonna hit that in the next few months! You are really out of touch!

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