December Auto Sales: 3 Places to Watch
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When December car sales are released, they will provide analysts and investors with their last good look into automaker performance during 2012 before full-year earnings are announced starting in late January. U.S. sales are vital, of course, but they are also the most visible and as such will likely be baked into the cake. Here are three other things to keep an eye on that could prove pivotal to the performance of General Motors (NYSE: GM), Ford (NYSE: F), Toyota (NYSE: TM) and the world’s other major car companies.
As we reported before Christmas, this country is now cemented as the biggest auto market on the planet, and, despite an economic slowdown, it remains the fastest growing. GM has led everyone in sales here for the past six years, and now sells more vehicles in China than in the U.S. Volkswagen is formidable as well, thanks in large part to the popularity of its Audi brand. Toyota, the other manufacturer in the country’s Top 3, lost momentum in the second half of this year when a territorial despite between its home country and China led to a major boycott of Japanese products.
While luxury models manufactured by the three carmakers above as well as Bayerische Motoren Werke and Daimler continue to enjoy strong sales, less expensive models and SUVs have also become increasingly popular among Chinese car buyers — particularly as the sales splurge migrates toward more family-oriented consumers and those in smaller cities. VW is seen strong overall in this area, with its popular Santana model now the 10th best selling car in the country. GM does even better in the category with its Buick line, as does Ford with its Focus.
Performance here is key because the fourth quarter — and December in particular — have tended to be the country’s strongest auto buying periods of the year. Holidays offer more time to shop, automakers launch many of their hottest models, and it is when the Chinese traditionally make their largest purchases before channeling their funds back into investments at the beginning of the new year.
The continent has been a weak spot for all consumer goods since the economic collapse in 2008, and auto sales have been no exception. Unfortunately, the decline shows no sign of abating any time soon, with overall November sales down 10% year-over-year and new-car registrations hitting a 19-year low. Renault and Fiat took the biggest hits, declining by 27% and 18%, respectively, while GM dropped 13% and Ford fell 10%. Price wars to protect market share have further eroded profitability.
Still, some companies are reporting better news. VW, Europe’s biggest seller, fell just 2.5% in November over the year before. Daimler’s Mercedes and Smart registrations dropped only 0.7% collectively, and combined BMW and Mini models actually grew 0.4% while Hyundai rose a whopping 7%. And Toyota says it will be profitable here — the company’s fourth largest market — for the first time in five years, thanks to streamlining costs.
While this nation has confounded outside investors in virtually every market in recent years, Russia’s appetite for cars is undeniably growing as more disposable income and improved financing options make their way to an increasing portion of the population. Sales have grown accordingly, and were up 40% in the first half of 2012 compared to the same period in 2011 and are now around 3 million annually.
Not surprisingly, automakers have taken note and some will start to show benefits. GM, for example, is ramping production here even as it scales back in the rest of Europe and plans to invest $1 billion in the country over the next five years. Ford, VW, Nissan and Renault are opening plants or will soon. Like China, the decided taste for foreign brands by this country’s consumers means more are likely to follow.
Toyota has estimated it will sell a record 9.7 million vehicles this year, which would bring it back to the top spot globally — a position it held before the earthquake and tsunami pounded manufacturing and sales in 2011. GM, which took the number-one position last year, has sold 6.95 million through the first three-quarters of 2012 and VW, which was number-two in 2011, has sold 8.29 million through November.
How December sales perform versus expectations in each of the above regions will go a long way toward forming full-year results for all of these companies.
TheChiefToo has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and 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!