Carmageddon 2.0: Auto Sales Slump As Hurricane Bump Fades

Authored by Jeffrey Snyder via Alhambra Investment Partners,

I can’t help but wonder what the CNBC author was going to write. It’s not a sentence I ever thought I would put down, but in this case the omission might have meant something. In reporting on auto sales yesterday, the article started out with the ultimate cliffhanger:

Major automakers reported lower U.S. new vehicle sales for February on Thursday as consumer

As consumer what? Obviously, a mistake in the editing process, an-all-too-familiar occurrence in the modern media landscape where the very idea of an editor is becoming outlandish. Still, given where we are in this inflation and boom hysteria, please, CNBC, finish the thought!

A more cynical reader might expect the original text would have done so by saying the usual, something like “Major automakers reported lower U.S. new vehicle sales for February on Thursday as consumer spending continued to be strong, robust, and downright booming otherwise.” It would have been a hard case to make given these results, but since when has the media failed to live up to that challenge before? Alas, we will never know honesty or typicality.

The numbers weren’t good for the vast majority of the auto sector, as sales in the aftermath of the hurricane aftermath continued to wind down. The rundown for February 2018 (all rates are year-over-year): GM -6.9%; Ford an identical -6.9%; FCA -1%; Nissan -4%; Honda -5.6%. On the plus side was +4% for Toyota on the strength of its redesigned Camry; and +6% for VW.

There were a few more ominous developments alongside these disappointing results. First, the trend toward heavy incentive spending by automakers is starting to look like it may have run its course. Manufacturers throughout last year went deep into their own pockets to subsidize what turned out to be flat sales at best, and for most slightly declining volume.

Mark LaNeve, Ford VP of US Marketing, Sales, and Service, said:

In February, overall Incentive spend for the industry was down $65 year over year, and was down $50 sequentially to January. This is really a change from what we saw most of last year and in fact what we saw most of the last three years when year over year changes in incentive spend were up on average $300 to $400 consistently during that entire time frame.

That may or may not be related to how sales of pickups and other light truck vehicles such as luxury SUV’s have softened after the sales boost following Harvey and Irma. Light trucks are higher margin products, a factor that has helped to a certain extent cushion the industry over the past several years as the labor market has slowed – and auto sales with it.

Overall, it has been the car segment which has been eschewed by consumers, the lower end vehicles that would be in demand by those same workers and potential workers who have become more uneasy about the labor market. The shift in gasoline prices since the oil crash has also rebalanced demand, too, toward light trucks and against smaller more fuel-efficient vehicles.

Mark LaNeve again:

The optimistic view is that people are just waiting for their next generation of trucks. The negative view is that good truck sales are in the rearview mirror.

Truck sales are for most still higher than they were last summer when sales of everything verged on outright contraction. There is still, however, a clear artificiality to the most recent months following last summer’s tropical eruption.

As for cars, this has to be a multi-faceted issue. The numbers are otherwise staggering; from August 2014 through and including the latest estimates for February 2018, the BEA figures car sales are down by almost one-third. Obviously, light trucks have picked up some of that slack, representing the rebalancing mix, but given that at the margins it hasn’t been enough to keep sales growing suggests a deepening macro divide in addition to gasoline and whatever else.

If truck sales falter here, and car sales continue to slip, then the profit squeeze becomes more and more of a primary rather than background consideration. Maybe manufacturers are content with production at these lower levels if incentives worked especially in the truck space, but profit growth can’t be put off forever.

It’s another major economic drag made out from the primary economic drag – the labor market.

In other words, there isn’t any reasonable expectation that auto sales are about to boom. If there was one, and some manufacturers last fall had expressed vague hopes they were, it was predicated on little more than broken windows. The predicted boost to sales in autos as well as other things as a consequence of storm-destroyed automobiles does not appear to have unleashed an economy-wide shift (the long sought “S” curve of Paul Krugman fame). It was quite often talked about in that way, of course, but it could only ever have been temporary.

Automakers in particular now have to face the prospects of a double downside; sales trends are moving back toward last summer’s weak pre-hurricane baseline to start with, and then comes the negative drag of all those broken windows (and who will eventually pay for them, and it wasn’t ever going to be insurance companies). Throw in questions about manufacturing profits, and downside (economic) risks in 2018 are even more than they ever were in 2017.


DillyDilly Sat, 03/03/2018 - 14:53 Permalink

BYE BYE LOVE (Cars ~ 1978)


"I can't feel this way much longer
Expecting to survive
With all these hidden innuendoes
Just waiting to arrive"


"Substitution mass confusion
Clouds inside your head
Involving all my energies
Until you visited

With your eyes of porcelain and of blue
They shock me into sense
You think you're so illustrious
You call yourself......INTENSE"


It's just a broken lullabye



greenskeeper carl Richard Head Sat, 03/03/2018 - 17:45 Permalink

A lot of the vehicles they are counting as 'sales' from the boom times were actually leases, and they will be getting turned back in at dealerships soon, which will put further downward pressure on new car sales. A bunch of 2 and three year old vehicles sitting on dealer lots are a good thing for me, because Ill be needing a new(ish) vehicle soon. My 15 year old tahoe is still running great and looks great too, but at 15 years old with over 200k, its getting kinda long in the tooth.

In reply to by Richard Head

hotrod Sat, 03/03/2018 - 14:55 Permalink

vehicle sales are down due to lack of destructive weather.   Forget weather we need a war that blows up entire cities.  That should make everyone happy.

karenm Sat, 03/03/2018 - 15:00 Permalink

I know for a fact Ford is buying cars back from their dealers, then re-selling them to other dealers, and booking sales twice. Yep, auto makers are that desperate to maintain whats left of their narrative.

Okienomics Sat, 03/03/2018 - 15:03 Permalink

Here's part of the problem.  I drive a 2001 full sized V8 pickup with 286,000 miles and still going strong.  Wife drives a diesel SUV with 304,000 miles and still going strong.  I've considered buying a new or used truck for several years now, but there's no sense of urgency at today's prices.

rejected Sat, 03/03/2018 - 15:17 Permalink

You gotta be kidding. I went to Lowes this morning. Saw countless $60-100,000 trucks driving around the lot.  Only clunker was my 20 year old Buick. Must be government as there is a lot of military here. And they offer them 20% discounts even though they (military) are making far more than the average Joe paying their wages. Look it up. lol. 

I remember being paid $78.00 per month, not allowed a car and had to beg for 96 hour passes but of course back then the military wasn't a 'career' like it is today for our coddled children. 

Back then GI meant Government Issue,,, Today it means Gender Identity. 

Chauncey Gardener divingengineer Sun, 03/04/2018 - 16:20 Permalink

Trust me, the dealer really doesn't want that lease return. It's bad enough with the channel stuffing for new product. Why would you pay an extra $20 large for the new one that will instantly depreciate when you drive it off the lot? The lease return competes with their inventory turn on the new stuff. As for me, no infotainment screens, no shift selector dials or "military grade aluminum bodies."

In reply to by divingengineer

Shpedly Sat, 03/03/2018 - 15:20 Permalink

I'd like to know why then, Ford can't make enough 2018 Expeditions right now. The average time on dealers lots is 6 days. Ford sucked it up and spent over 200 million in overtime and extra shifts to ramp up production. The base sticker on a 2018 XLT 4X4 is $54700. What the fuggity! Something doesn't jive with these doom articles. Oh you want a Platinum 4X4? She starts at a hefty $76000. Double what the fuggity!!

CRM114 Sat, 03/03/2018 - 15:24 Permalink

They simply aren't selling the vehicles people want. I want my next truck to be a half ton with no electronics to fail, a small diesel engine, and the rest I can fix myself. $25,000 list. Something from 1995, basically. Have to get the Gubmint to get rid of all the stupid diesel rules first.  And 3 of my buds want the exact same. Well, OK, Bud #2 wants the smartphone sh!t, but he can whistle or buy aftermarket.

Shpedly CRM114 Sat, 03/03/2018 - 15:57 Permalink

I empathize. Try and find a basic 1/2 ton regular cab 8 foot bed. It's near impossible. Right before cash for clunkers you could buy a brand new F150 for 13 grand. Now if you find the same basic truck its $24000. Frigging lunacy. As to engines, just ask any experienced Ford technician and they will flat out vote for the 5.0 V8. 

In reply to by CRM114

Chauncey Gardener CRM114 Sun, 03/04/2018 - 15:57 Permalink

I just had to repo a 2008 Ford Explorer with the 4.6 V8. In three weeks I've spent $4800 on major repairs, this thing is just eating me alive. My mechanics specialize in SUV's tell me that the known issues with this motor are a litany of cheap parts, bad engineering, and bean counters. Just had to replace all the exhaust manifold studs (3 literally breaking off, finding them on my driveway), on the left cylinder bank--known issue as well as cracking exhaust manifolds. Known issue--seized spark plugs in the cylinder heads. Known issue, coolant being sucked into the transmission/transmission fluid being sucked into the cooling system. Known issue on Explorers & Expeditions with the floor shifter for the automatic--broken plastic parking pin interlock. Just replace the entire shifter mechanism to get the keys out of the igntion. Yeah, tell me about "built Ford tough." 

In reply to by CRM114

RU4Au CRM114 Sat, 03/03/2018 - 16:09 Permalink

That's what I was looking for but ended up with a $40k Colorado diesel. I love the truck overall but it has some quality issues and a big Orwellian drawback.

The hood flaps at highway speed. A dash vent whistles. When I take it in for it's first oil service and these issues they tell me, "Yeah, so we drove some other Colorados and, well, they just do that." End of story.

If you look into the owner's manual it says that if you sign up for Onstar you have consented to have your vehicle monitored and the data sent to corporate for their purposes. I did not sign up for Onstar. Don't want it, and don't need it. My, was I surprised when out of the blue I start getting email notifications of my monthly Diagnostics Report. It tells me the vehicle mileage, tire pressures....  What the????

Knowing that this organization was assumed by the deep state during a pending bankruptcy, who knows exactly what data is being collected, sent to whom, and for what purpose?! Aside of vehicle diagnostics this car is capable of collecting location, speed, acceleration, and who knows what else? We know that the NSA keeps all data transmitted by email or cellular (Onstar). When I took it in I notified them that I did not sign up to be monitored and resent the infringement of my privacy, and potential violation of my 4th amendment rights. They were instructed to disable data collection by removing the storage of the data. "Yeah, we're looking into that."

If you buy one of these, and I do love the truck but hate the deep state, tell them specifically that you don't want Onstar or any monitoring and document it. After all, you have a phone. I would love to hear how they react.

If I get the same lame reaction next week they will hear from my lawyer.

In reply to by CRM114

TrainReck Sat, 03/03/2018 - 15:26 Permalink

Why buy a new car when you can buy a 2018 at the end of the year or early next year at a 40%-50% discount from the sticker price.  Middle class people today buy out of need not because they have a lot of discretionary income if any at all.  0% & a shitload of incentives have helped car & truck manufacturers minimally in a NO growth zombie economy.  It's been that way going on a decade & it's not going to magically get better.  I like the new 2018 Ford Expedition but not at $70k.  I'll wait until I see one in a year a 2 with under 10k miles & $30k.  Until then our 2005 GMC Yukon with the little 4.8l V8 & 160k miles pulling a 5,000 lb. trailer works fine for now.

Consuelo Sat, 03/03/2018 - 17:03 Permalink



"In other words, there isn’t any reasonable expectation that auto sales are about to boom. If there was one, and some manufacturers last fall had expressed vague hopes they were, it was predicated on little more than broken windows."


Contrasted against this from earlier today:…


Just shut up and - well, you know - it starts with a 'B' and ends with a 'D', right...?


Sonny Brakes Sat, 03/03/2018 - 17:20 Permalink

Who is asking for all of the technology the makers are putting into their cars now. Consumers are being sold things that don't make the car last any longer. All cars eventually need to be recycled. The money spent on them isn't going to come back as a return on investment. Take a look at that vehicle sitting in the driveway. It serves as economic freedom allowing you to get to and from work but sits there getting old on a daily basis.

Chauncey Gardener Sonny Brakes Sun, 03/04/2018 - 16:08 Permalink

I remember when people were bitching about the lack of cupholders. Now, everybody "wants (?)" giant infotainment screens because they are addicted to their smart phones...focus groups? Having been in the high tech arena and seeing the proliferation of electronics and software, it's now a hellish mix of rice counters and designers who save a few buck on eliminating controls, hence shift select dials and 9-speed electronic transmissions. Combine that with the need to satisfy the oppressive CAFE standards that are impossible to achieve, and you get overly regulated, overly "feature laden" expensive cars that are heinously complicated and costly to repair and maintain. Bring back the basic, no-frills sedans, station wagons, and work pickups and maybe you won't "need" a $50,000 fashion truck or SUV. 

In reply to by Sonny Brakes

3-fingered_chemist Sat, 03/03/2018 - 19:02 Permalink

All I want is a reliable drivetrain and power windows. Don't even need a/c. Who needs AWD to drive in an urban setting? All that is extra shit to break and maintain. Ridiculous that not one of the automakers has tried to tap into this market. They would sell millions of cars easily with little overhead and cost.