Earlier today domestic auto sales came in a bit weaker than expected. Total numbers are now out. And they are much worse than expected.
The Bloomberg Econoday consensus estimate for total vehicle sales in June was 17.3 million at a Seasonally Adjusted Annualized Rate (SAAR). The actual report shows 16.7 million SAAR sales.
Highlights
The first hard look at consumer spending in June is negative as unit vehicle sales fell a very sharp 4.6 percent to a 16.7 million annualized rate which, outside of March’s 16.6 million, is the lowest rate since April last year. Sales of North American-made vehicles fell 3.7 percent to a 13.2 million pace from 13.7 million with imports down 5.4 percent to 3.5 million. Data on cars and light truck show similar declines. These results are worrisome, suggesting that consumer spending, which surged in April and proved strong in May, may have slowed sharply in June. Today’s results point to a decline for motor vehicle sales in the June retail sales report, a component that showed strength in the two prior months and was a regular source of retail strength during 2015.
Motor Vehicle Sales
Have autos peaked this economic cycle? I think so.
Mike “Mish” Shedlock
The stupid dashboard designs of the newer cars I have rented make the prospect of buying a car unappealing. I’ll wait til the self driving cars come out if I have any money left by then.
Like with everything else we buy today, we need classes on how to operate it. Had a loaner the other day that I never could figure out how to adjust the fan speed on the A/C. I guess it is a built in anti-theft feature as few will know how to operate it.
I think that for many folks the constant “updates” are a significant deterrent to buy new. Just went through it on a new laptop. Put it off for two years, not wanting to have to deal with learning a new operating system.For those unemployed or lacking challenge in their lives, maybe it’s a desired challenge, but those of us trying to make a living being forced to reeducate ourselves every few years, it is nothing but a pain in the ass. For my typical business operations that require computers, they are no more productive to my needs today than when I was using DOS. Planned obsolescence is a built in driver for technology industries, and we see today Microsoft trying to force people to upgrade to windows 10 by running automatic updates that are difficult to turn off. Part is driven by greed, but I think more so it is driven by desperation.
How many technology time bombs are built in to modern cars that after warranty will make them undesirable once repairs are not free?
I recently sold a industrial CNC router that was twenty years old. The machine was in perfect order but simply no longer needed, but even though it was perfectly functional and superior in many ways to new machines, its 1995 purchase price of $200,000 had depreciated to $2,500. Simply because the computer PLC was “old” technology (no windows). Technology has driven much of our economy but I do not believe it is due to increased productivity. I think it is because business machines had a much longer depreciation life then anything new today. They are all equivalent to a used laptop.
Keynesian dream of broken windows where we must replace EVERYTHING every few years.
Good post. It’s exasperating being forced to update even when what you’ve got is functioning just fine. Planned obsolescence is exactly that, planned.
Madashell I feel your pain. I design homes using CAD. Every other year they want you to upgrade or now you can use their cloud based system for only 45 bucks a month. Sure you get some new tools like light studies or the ability to place the home on a client’s lot and show them their home. Honestly who cares about these tools for home design, most clients want a home designed that works. During my time designing homes I have had one client wanting to walk thru his three D home and well I charge 35 bucks an hour to do this as you do not just click and see the home. So I a not going to upgrade my CAD unless I absolutely have too.
You would be surprised how many home designs do not work once construction begins. I just reviewed a plan for a friend of mine and the plumbing on the first floor would have passed in the middle of the master bedroom. So we redid the second floor. LOL he should have come to me to begin with but wanted his architect buddie to do the home for three times my cost. I am a AIBD home designer with 40 years experience designing and actually building homes. I cannot do commercial but who cares.
I had to update my entire program when windows 10 hit. Expensive to say the least. Next year I will have to build a whole computer system as the hardware continues to get better. Currently the system I type on and use is 10 years old. Just made minor upgrades but dual core processers are so out of style now for CAD work. Thank goodness my plotters will still work.
Old Guy, I feel your pain. We use Alphacam as our cnc programing software. We purchased a new computer with windows 8 and of course Alphacam stopped working. We were told we needed the newest update at the “special” price of $2k. Once loaded it still didn’t work…and of course they had changed all of the menus so we had to “relearn” the software again to only find it still didn’t work. Then we were told we needed a new post processor from the machine manufacturer. We paid the$500 for that….and it still didn’t work. Eventually after all of that and speaking to numerous techs over a three month time frame we did finally get it to work after discovering we did not need the upgrades, only a different file location for initialization. Of course Alphacam would not refund, as they said we had already loaded the software.
I faced the same issue with Autocad with a windows 10 with a new computer. Of course my old software (version 2002) would not work and Autocad wanting big money (or monthly/yearly subscription) but I found a company online that sold a $100 software that allows old ACAD to run on windows 10. It is never ending.
I have been using Quickbooks since DOS and always found it good, but they have continued to upgrade over the years creating more issues that they solve. I have been using their payroll software for many years and in the beginning it only required purchase of new tax tables every year for $70. Today its almost $500 and if you don’t pay to upgrade the primary software every few years it stops working and if you don’t buy the yearly tax subscription, the payroll software will not work at the new year. It’s a big scam of which (like everything else today) we can’t escape.
Everything we used to consider an asset, tools we use to earn our living, we seem to not be able to own…only effectively rent as nothing remains functional or of value unless we pay a calendar “rent” or effectively a tax. Short of dropping out of the economy completely we MUST have these things and continue to pay whatever it costs. Employees are somewhat insulated from this, but their perceived increased productivity is not coming from their skills but from these rapidly depreciating assets, ROI getting smaller by the day.
Planned obsolescence is fraud.
Did auto sales peak in April 2015? Looking at the graph, it sure looks like it and was going down over an eight months period. But they recovered and moved higher for the rest of the year.
Auto sales are the last bright spot in the Obama recovery narrative. Looks like the end of the narrative to me.
What??????? No mo’ “fairy” tales??????
Does that mean used car prices will fall?
Better get those pre-approved Syrian/Afghan/Iraqi refugees over here ASAP.
I bought a new car in May. They practically gave it away to get my business. So I figure the industry sees the spray painting on the wall. It’s spelled B-U-S-T.
GM stock has a PE less than 5 and a steep down trend.
Fiat Chrysler June U.S. sales: +6.5% (keep in mind that at FCA, sales occur when dealers recieve vehicles):
http://seekingalpha.com/news/3191490-fiat-chrysler-june-u-s-sales-plus-6_5-percent?source=email_rt_mc_readmore&app=1&uprof=45&dr=1#email_link
Spot on Greg most do not understand the sale on an Auto is counted once shipped to the dealer.
Self driving car accident produces first casualty back in May :
http://mobile.nytimes.com/2016/07/01/business/self-driving-tesla-fatal-crash-investigation.html?referer=https://www.google.com/
from looking down my street, they’ve already sold a new car to everyone, so they’re done.
my 1999 Silverado will be the last vehicle i ever buy………parts are cheap compared to payments.
For a good chuckle, plot the returns of Ford (F) and Govt Motors (GM) — and put parts companies on the same chart. Genuine Parts (GPC), Advanced Auto (AAP), Autozone (AZO)
Yahoo claims F and GM are nearly identical, returning -8.5% cumulative over the last 5yrs (excluding dividends). GPC (over the same 5yrs, again excl dividends) returned 78.4%, Autozone 167.8%, Advanced Auto parts 178.6%
People who take care of their cars appear to be much more profitable customers than those who buy new cars with subprime loans.
Cars are too expensive. We need some deflation in car prices so that we the people can afford them again. Enough with the leasing.
You solved your own question … Mr New Vehicle Sale, meet Mr Newer Model Vehicle Coming Off Lease … by the truckload. Of course, the unwind of the massive channel stuffing by manufacturers / dealers will throw a little gas on the fire … just a little 🙂
Las Vegas, April 01, 2016 — Today, at the National Automobile Dealers Association (NADA) conference, Experian Automotive announced a new study showing that leasing as a financing option for new vehicles has grown 76 percent since the company began publicly tracking the data in 2008. Additionally, the upward trend of leasing has resulted in a rising surplus of vehicles coming off lease. In fact, according to the analysis, more than 1.8 million vehicles will come off lease by the end of 2016 (April through December).
https://www.experianplc.com/media/news/2016/nada-off-lease-analysis/
Channel stuffing been going on for quite a while regarding the Big 3. At some point dealers will say “no mas”
“Sale” counted when dealer takes delivery rather than customer purchases.
Every month I look at each of the 3 press releases. GM sales release includes its forecast for total monthly sales SAAR. GM and Fiat also give dealer inventory number … well, that is until recently. The last month Fiat gave a dealer inventory number was April … when it had 84 days of inventory (at then sales pace). Now nowhere to be found. And you know the old saying … if you got bad news, quit reporting it.
Here is April
http://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2016/may/APRIL_2016_FCA_US_LLC_SALES_IN_USA.pdf
Here is June … sans dealer inventory
http://www.fcagroup.com/en-US/media_center/fca_press_release/FiatDocuments/2016/july/JUNE_2016_FCA_US_LLC_SALES_IN_USA.pdf
Normal dealer inventory should be closer to 60 days. GM still publishes it. In June went from 67 days to 72 days (but they assumed sales pace of 17.0 million SAAR … so inventory number higher).
http://www.gm.com/content/dam/gm/mol/docs/GM-Deliveries-June-2016.pdf
I was listening to CBS News over the last few days and they were raving about how wonderful the auto sales were.
The house that Walter Cronkite built so carefully… the house that Dan Rather turned into a joke
They’re just circus side-show freak fun houses now.
GM and the media still do not get why the Silverado cannot compete with the Ford F150 . GM touts the steel body but most do not understand why Ford went to aluminum, well all truck will be aluminum in the coming years, Ford is just ahead of the curve, so trucks can meet the new governmental mileage standards.
Honestly they need to have separate standards for work trucks.
Forged aluminum has impressive strength.
No doubt the really bad June weather was the cause. Obama told us the economy is great!!!
The shows annual sales have broken the uptrend line of support. The downtrend has begun.
Total sales in dollars is more meaningful than just a count. When official policy is to rob everyone, to pay banksters buying overpriced McLarens and public unionistas buying similarly Volvos; by far the rational thing to do for the industry is to shift resources towards serving the annointed masters, and away from serving those designated to starve to death in a debtors prison in order to keep the “system” intact.
I work in a place near where a lot of illegal alien day laborers live.
They are smart when it comes to cars and have been driving well made Japanese third and fourth hand vehicles for years. Many old college parking stickers from the 1990s tell the origin of these cars; cheap cars sold by graduating college students, which are then passed on and resold “to family members”, with the same last name, thus there is no smog test required or resale tax.
If the cars aren’t beat into the ground, they fill the trunk with used tools and drive them south to Mexico and Central America.