Key macroeconomic data points clearly show that in addition to pent-up auto demand continuing into 2012, rising if still guarded consumer confidence is positively impacting the economy. That was the conclusion of speakers from investment bank Jefferies and Edmunds.com who took part in a co-hosted conference call this week.
In terms of this year’s auto sales, Jefferies expects the November 2011 seasonally adjusted annual rate (SAAR) to come in at 13.3- to 13.5-million units, while Edmunds.com is forecasting a SAAR of 13.6-million units.
Jefferies analyst Peter Nesvold said the midpoint of Jefferies' range implies 9.9% year-over-year (YoY) growth (vs. +8.9% YoY in October) and a 1.7% sequential improvement from October’s 13.2-million SAAR reading.
The slightly higher Edmunds forecast of a November SAAR of 13.6 million units would mark the best November since 2007. Edmunds.com “believes the strength in sales for November is likely to be centered around strong deferred demand and higher incentives resulting in lower prices. This momentum is expected to continue into 2012 with new product introductions.”
Edmunds.com stated its forecast for 2012 auto sales remains at 13.5 million units. That figure would mark a “modest” 7% YoY increase from its 2011 full-year forecast of 12.6 million units. It will also mark the third year of sales growth for autos “since the industry bottomed-out in 2009.”
Jessica Caldwell, Edmunds.com’s senior director of pricing & industry analysis, cited three factors that should drive up auto sales in 2012:
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- Improved selection due to new product introductions
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- Easing of credit conditions
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- Ongoing release of pent-up demand
Caldwell explained that the pent-up demand is of two distinct types. First, there is the demand that has been accumulating since the recent recession began. Secondly, there is unresolved demand from when the pricing for Japanese OEM models was higher this summer in the wake of the earthquake and tsunami’s impact on production and shipping.
It was noted that April and May of this year were the worst months of production for Japan’s J3 automakers. On the other hand, “Nissan and Toyota were able to replenish their production much earlier (June/July), vs. Honda, which was not able to attain favorable production levels until September.”
According to Caldwell, auto sales began their rise in September “as the threat of a double-dip recession receded and auto production grew.” She said there is now a “mini-bubble” of sales in place due to those consumers who held off on buying cars this summer and that bubble will continue into the first quarter of 2012.
Jefferies’ Nesvold affirmed that the “Japanese auto inventory situation is now under control,” meaning buyers of those cars need not hold off any longer from hitting the showrooms and buying.
He also pointed out that it is a good sales environment for autos in general as “gasoline prices are staying relatively low and the [early] Black Friday retail sales results look good,” which he noted bodes well for consumer confidence in general.
Edmunds.com predicted that GM and Ford will experience “slight” market share gains (month-over-month) in November and all other manufacturers “will exhibit minimal changes.” Toyota is expected to post its best market share reading (13.5%) since April, which is still lower than the 16%-17% market share it had before the recalls in 2010. “All of these dynamics are likely tied to the J3 inventory constraints having cycled through at this point,” advised Nesvold.
