x Abu Dhabi, UAEMonday 24 July 2017

US car sales show signs of stability

International Major car makers are expected to report the highest sales rate of 2009 when they post results for June.

DETROIT // Major car makers are expected to report the highest sales rate of 2009 when they post results for June, as deep discounts limit industry-wide results to a 30-percent decline. In the context of the US auto industry, where sales have been slumping for four years, that would constitute good news and support the view sales are near bottom after a punishing decline to nearly 30-year lows, analysts and executives said.

All of the largest automakers are expected to post deep US light vehicle sales declines for June to round out what has been the weakest market since the early 1980s. "We continue to believe that US auto sales have bottomed this cycle and are heartened by seemingly strengthening retail sales even ahead of any impact from 'cash for clunkers' ... " JP Morgan analyst Himanshu Patel said in a note to clients.

Ford expects to report sales declines in the 10 percent to 20 percent range in June, which would be the best result of the top six selling automakers in the US, following on a recent trend of outperforming sales for Ford. Analysts and Ford see the industry as likely posting a sales decline in the 25 percent to 30 percent range for June from a year earlier. On an annualized basis, the rate could top 10 million units, the strongest total since December.

Edmunds expects Chrysler sales to drop 29.1 percent, General Motors 28.9 percent, Honda 31.4 percent, Toyota 28.7 percent and Nissan 24.2 percent. GM's bankruptcy filing on June 1, inventory sell-offs from Chrysler dealerships that were losing franchises early in June, and the completion of the sale of Chrysler assets to a group led by Italy's Fiat SpA all may have distorted the results for the month to some extent, analysts said.

"June industry sales of light vehicles appear to have improved somewhat further versus last month's levels, benefiting from some recovery in consumer confidence but also from the large discounts offered by Chrysler and terminated GM brands in order to liquidate inventories," Barclays Capital analyst Brian Johnson said in a note to clients on Monday. US car sales may have pierced the 10 million vehicle mark in June on the annualized basis economists follow as an early snapshot of the appetite for big ticket items.

A result at or above 10 million units would be the strongest since the 10.3 million unit rate in December, but still one of the weakest since the early 1980s. "We're still a long way from 16 million unit sales, but things are moving in the right direction," Jesse Toprak, executive director of industry analysis for Edmunds.com, said of sales rates seen in 2007. A Reuters poll of analysts found a median expectation for US car sales of 9.81 million vehicles on an annualized basis, which would be down slightly from the 9.9 million unit rate in May and far below the 13.7 million rate in June 2008.

However, on Monday, Ford US. sales analyst George Pipas said a 10 million unit rate was possible. Barclays and J.P. Morgan both have forecast a 10.1 million unit rate. Overall, the first half annualized sales rate could be 9.5 million to 9.6 million units, according to Ford. Ford expects the US economy to begin to pick up in the second half of the year, with monthly sales rates in the 11 million unit annualized rate range, and has increased its third-quarter production plan for North America.

Hyundai's US chief executive, John Krafcik, told Reuters last week that US industry sales were stable at low levels but could improve slightly, potentially rising to exceed a 10 million unit annualized rate in the fourth quarter. Scotiabank Group said it expects second-half 2009 US auto sales volumes above the 10 million unit annualized rate mark. Analysts expect market distortions from the GM and Chrysler bankruptcies to begin to dissipate in the second half of 2009 and see new U.S. government incentives to trade low mileage vehicles for new cars providing a moderate sales bounce.

Standard & Poor's said last week the so-called "cash for clunkers" program could increase US car industry sales by 250,000 vehicles in 2009 though the tenuous U.S. economy and consumer confidence remain big variables for car sales. *Reuters