3 Winners and 1 Loser in the US Auto Industry

Masam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

More bounce-back and replacement sales from Superstorm Sandy, a strengthening auto market, and aggressive marketing helped the US light vehicle seasonally adjusted sales rate to achieve a five-year high. The US SAAR ended up 15.31 million. Though it dipped below the forecasted 15.6 million mark, it was still a strong finish for the year.

December's actual monthly sales of 1.35 million rose 13.4% YoY. Many readers tend to get confused between the actual sales and the SAAR figure. While the actual sales figure shows us the actual amount of vehicles (in units) that have been sold in a particular month, the SAAR figure depicts the selling rate of vehicles for a particular month. By this I mean that a SAAR rate of 15 million for a particular month indicates that the auto industry is on pace to sell 15 million vehicles on an annual basis. Therefore, a SAAR of 15.31 million in December tells us that the industry has sold 15.31 million vehicles in 2012.

Strong sales for the month of December show us that there was little help from replacement demand in the Northeast. The sales momentum picked up post-Christmas despite the growing uncertainty surrounding the fiscal cliff. The month-over-month (MoM) increase in incentives also helped to improve the auto sales.

The strong retail sales continue to harness growth for the auto sector. The retail SAAR came out to be just below 13 million units. The fleet SAAR ended up flat MoM. Fleet sales are normally high-volume sales that come as a result of demand from large companies and government agencies. These sales are almost always at discount prices. On the other hand, the retail sales involve lesser discounts and therefore are considered bullish for the auto industry players.

Overall, the incentives were down 5% YoY but up 3% MoM. Pent-up demand, year-end deals, low-rate financing and easing credit terms are some of the obvious reasons for strong sales this month.

<img src="/media/images/user_15211/capture1_8_large.PNG" />

Source: WardsAuto 

The performance of various automakers

The following chart shows the performance of seven major auto players in the U.S.:

<img src="/media/images/user_15211/capture2_5_large.PNG" />


Except for Nissan Motors (NASDAQOTH:NSANY), no other major OEM player showed a YoY decline in sales. This news sent bullish signals to the market.

We all know that apart from the North American auto companies, which we normally call the Big Three, there are Asian and European players as well that contribute towards the final US SAAR. In fact, it was a European player, Volkswagen (NASDAQOTH:VLKAY) that achieved a massive growth of 35% in sales in 2012. The following chart shows the market share of North American, Asian and European players in the U.S.:

<img src="/media/images/user_15211/capture4_1_large.PNG" />


Before, I mention the performance of these three groups, it is important to have a glance at the market shares for the seven major OEM players:

<img src="/media/images/user_15211/capture3_3_large.PNG" />

Japanese Players

Honda Motors (NYSE: HMC) posted the largest gain among the seven major OEMs. The company saw three of its cars securing positions in the top 10 most sold light vehicles in the U.S. for the month of December. These cars were Honda Civic, Honda Accord, and Honda CR-V.

Similarly Toyota Motors (NYSE: TM) also posted a high single-digit growth rate in sales, helped by its popular cars, Camry and Corolla. Both these cars were not only among the top-ten most sold cars in December but also managed to make it to the top-ten most sold cars of the year. Nissan was the only Japanese manufacturer that disappointed the investors. Even the popularity of Nissan Altima could not help Nissan post a positive gain in the month of December.

European Players

I have already stated that Volkswagen showed a large YoY gain of 35%. Moreover, this was the fifth largest gain, only lower than the gain achieved by Porsche (61%), Fiat (59%), Smart (40%) and BMW (39%).


Chrysler posted a gain of 20% in 2012. The company finished the year with 1.64 million units sold. It is interesting to note that this company increased sales more than any major automaker except Toyota and Honda, the Japanese automakers that rebounded sharply from the 2011 earthquake in Japan. 

The point of concern for Ford (NASDAQ: FORD) was its YoY declining market share. However, it was encouraging news for the investors that the Detroit-based automaker achieved 5% growth in 2012. The company is quite bullish on its small car sales in the near future. It is obvious that small fuel-efficient cars are demanded in higher numbers in recessionary times. According to Ford, its small car sales soared 29 percent in 2012. The new C-Max hybrid is a big success. Also, Ford’s F-series truck was declared as the most sold light vehicle in the US with an astounding sales figure of 645,316 units in 2012.  

General Motors (NYSE: GM) remains the market leader in the U.S. The company bounced back from its worst market share since 1980 in November (16.4%) to 18.2%. Much of it was helped by some aggressive marketing and increase in incentives. However, the bears stated that the market share declined to a historically low level of 17.9% in 2012.

This should not be a surprise for the market given that the company is undergoing the biggest product launch since its inception. GM’s current product portfolio is the oldest in the industry. GM’s management believes that it will take another 18 months to turn the whole portfolio over.

The company was successful in pulling down its inventory – something that it has been criticized for over and over again. The inventory fell by 9% on a sequential basis.

Foolish Bottom-Line

Robust auto sales in the last two months showed an increasing divergence from the increasingly negative outlook on the fiscal cliff resolution, particularly post-Christmas. Such consumer buoyancy coupled with replacement demand in the Northeast can setup an even stronger start to 2013 for automakers, normalizing in the second half of the year.

AnalystX has no position in any stocks mentioned. The Motley Fool recommends General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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