US Auto Sales Slip as Confidence Falters

Comparisons of auto sales with last year give encouragement for those looking for positive signs of growth but the process is largely pointless in terms of assessing current and future trends. 2009 was such a horrible year for car sales that this year was almost certain to be better in any scenario other than the world coming to an end. From an encouraging start to the year, car sales have taken the same path as housing starts and several other pointers on the economy – sales were down in June from May. According to a Reuters article on an annualized basis tracked by analysts and investors, U.S. auto sales slipped to 11.08 million vehicles in June, down from 11.6 million in May and below the 11.15 million average of the first half, according to industry tracking firm Autodata. All auto makers reported increased sales in the first half of 2010 but Paul Ballew, chief economist at U.S. insurer Nationwide in Columbus, Ohio and a former GM sales analyst said he had reduced his forecast for 2010 sales by 500,000 vehicles to the low 11 million vehicle range. Some analysts had expected 2010 U.S. auto sales to rebound as high as 12.5 million vehicles, up from the 10.6 million sales recorded in 2009. But the high end of that full-year sales forecast now appears out of reach the article said.

Contrary to what the environmental lobby would have us believe that buyers are steadily migrating towards smaller more economical and greener vehicles the article says one of the stand-out trends in June sales was that sales of trucks and SUVs were stronger than overall vehicle sales, a bounce automakers attributed to continued steady gas prices. Ford’s F-Series pickup truck line, the automaker’s best-selling and most profitable product, gained 30% from a year earlier. Sales of the Chevy Silverado were up 25%, while sales of the GMC Sierra jumped 27%. Chrysler’s Ram truck line trailed its rivals with a 7% gain.

In Europe, generally auto sales are also showing signs of distress. German domestic car sales dropped by 32% in June from a year earlier, although exports were up according to an AFP article French car sales dipped too as both markets suffered from an end of scrappage schemes. Perversely debt stressed Spain saw a 25.6% surge in sales last month as purchases were brought forward ahead of a 2% increase in VAT. Standard & Poor’s said in an article they expected sales to fall 9-10% this year in Europe due to the end of cash for clunker programs. With big ticket items replaced and VAT increases on the way in some markets, the European auto market is going to struggle until 2013 the ratings agency says.

That leaves China as the sole bright spot in the automotive market confirming the good sense of many of the automakers major investment decisions over recent years in that market. Nevertheless following restructuring and in some cases the cleansing via Chapter 11, the US automakers are much better able to weather a period of choppy sales early in this decade than they were in the last.

–Stuart Burns

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