After an abysmal March print and growing speculation on wall street that auto sales are looking less like a "plateau" (Ford's label not ours) and more like a debt-fueled bubble on the verge of an epic collapse, auto investors were looking toward April auto sales for signs of hope. Unfortunately, the "hope" trade failed to materialize as every single, major auto OEM missed their April sales estimates in fairly spectacular fashion.
Here's a summary of the April carnage:
Or, in units if you prefer:
According to Ward's data, April SAAR came in at 16.8mm units, down 3.7% YoY, which was well below the JD Power estimate released last week of 17.3 mm.
Meanwhile, the YoY change in unit sales was the worst since 2011.
Meanwhile, inventory days are still trending higher as OEMs continue to push product on to dealer lots even though sale through to end customers has seemingly stalled.
GM, one of the few OEMs to actually disclose dealer inventories in monthly sales releases, reported that April inventories increased to 100 days (935,758 vehicles) from 98 days at the end of March and just 71 days (681,402 vehicles) in April 2016. But please don't worry because GM would like for you to know that their soaring inventories are normal and "reflect strong sales"...no really, here's the quote from their press release:
"As planned, GM’s inventories reflect strong sales, lower car production and strategic, launch-related growth in truck and crossover stocks."
Meanwhile, GM's incentive spending also soared YoY to 11.7% of their average transaction price (ATP) versus 10.3% last year. And Ford also announced on their sales call that average incentive spending was up about $300 YoY.
And, as one industry observer notes, the combination of rising inventory levels, higher incentive spending and pending model changeovers in coming months could imply that the auto industry could unravel in fairly short order.
to a very specific point in time. If new car retail numbers miss by the degree that I'm concerned about; it's going to cause a huge day— Daniel Ruiz (@DRuizG80) April 29, 2017
with even larger incentives. This will all be happening during the 60 day period that I pointed out relating to unsold used car inventory.— Daniel Ruiz (@DRuizG80) April 29, 2017
rid of prior model year new cars. I believe that new car incentives will put massive pressure on used car values in that time period.— Daniel Ruiz (@DRuizG80) April 29, 2017
Of course, despite the abysmal numbers, OEMS still tried to paint a rosy picture for their industry.
- GM: “When you look at the broader economy, including a strong job market, rising wages, low inflation and low interest rates, and couple them to low fuel prices and strong consumer confidence, you have everything you need for auto sales to weather headwinds and remain at or near historic highs."
- Ford: "We're maintaining our industry guidance for the year of 17.7 million vehicles. To put things into perspective, it's important to note that we've seen a plateauing industry, basically last year and this year, and when you have that kind of an industry, you're going to have variations, both up and down, month-to-month."
But while OEM mgmt teams remain optimistic, it seems that investors are getting slightly concerned as both the OEMs...
...and suppliers all tanked on today's sales figures.