After September's auto gross sales surge, what's subsequent?

Like a bolt from the blue, the U.S. auto promoting tempo in September turned hotter than any month within the final 12 years.

Confounding forecasters’ modest expectations, gross sales totaled 1.53 million, leaping 6.three p.c from a yr earlier. That ended eight straight months of declines from 2016’s report tempo.

The seasonally adjusted annualized promoting charge was 18.6 million, the very best since July 2005 and the sixth-highest SAAR on report. The Bloomberg consensus forecast of analysts had been 17.four million.

So what occurred in September? Automakers and analysts cite a mixture of post-Hurricane Harvey substitute demand, make-up offers from storm-delayed August purchases, larger fleet quantity, a five-weekend gross sales month, engaging new merchandise and simpler incentives geared toward clearing out getting older 2017 fashions.

And the extra essential query: Will it proceed?

Mohatarem: U.S. economic system sturdy

Analyst Alec Gutierrez of Kelley Blue Ebook mentioned hurricane substitute gross sales will present a modest enhance for 2 or three months. However he says the elevate is not sufficient to alter his full-year forecast of 17.1 million, which might be down from final yr’s 17.6 million gross sales.

Nonetheless, auto firm economists say U.S. market fundamentals help development within the months forward. Final week, Ford Chief Economist Emily Kolinski Morris predicted fourth-quarter development “within the 2 percent-plus vary” for the overall economic system. Basic Motors Chief Economist Mustafa Mohatarem known as the economic system “the principle pressure” driving auto quantity.

“With the U.S. economic system strengthening, retail gross sales ought to stay sturdy for the foreseeable future,” he mentioned.

SAAR’s biggest hits

September’s seasonally adjusted annualized promoting charge was among the many highest in latest historical past.


Certainly, September was so sturdy that two automakers cured their gross sales yr to this point. Toyota Motor Gross sales and American Honda had been down by eight months, however sturdy Septembers flipped them into optimistic territory.

And a few see September as the primary spherical of a fourth-quarter skirmish amongst automakers as victims of Hurricanes Harvey and Irma exchange storm-damaged automobiles.

Vans carry the load

September was additionally the truckiest month but. Pickups, SUVs, crossovers and vans captured 64.7 p.c of the quantity, driving sharp positive factors for GM, Toyota, Ford Motor, Nissan North America and Honda and surpassing the highs of 64.5 p.c set in June and August. Simply 48 months earlier, the combo was just about even: 50.1 p.c vans.

Crossovers led September positive factors. The phase surged 18 p.c to 452,029 automobiles, led by three contemporary fashions that every bought not less than 12,000 extra items than final September: the Toyota RAV4, Chevrolet Equinox and Nissan Rogue.

The Nissan Rogue was the fifth-highest vendor in September.

“Automakers preserve filling in all of the crossover niches to satisfy demand,” mentioned Mark Wakefield, head of the Americas auto observe at consultancy AlixPartners, noting the increasing variety of crossovers akin to the brand new Volkswagen Atlas.

However Hurricane Harvey appeared to spur a lot of the September surge.

“Above all, it was Harvey,” mentioned Wakefield. He famous car injury was particularly heavy due to flooding and officers advising some residents to remain in place as a substitute of evacuating.

Main the best way

5 fashions accounted for greater than two-thirds of September’s gross sales development.
  Unit improve, Sept. 2017 from Sept. 2016
Ford F collection 14,493
Toyota RAV4 12,957
Nissan Rogue 12,510
Chevy Equinox 12,251
Chevy Silverado 9,856

“So the storm destroyed a variety of vehicles,” he mentioned. “It destroyed the vehicles folks care about as a result of if you happen to go away, you may take the very best car you’ve, not the beater.”

Historically, native gross sales drop within the first 30 days after a serious hurricane as sellers restock and victims await insurance coverage payouts to exchange totaled automobiles. However not in sprawling, auto-dependent Houston, a primary marketplace for extremely worthwhile pickups. Automakers, lenders and sellers scrapped the hurricane playbook after Harvey pounded Houston in late August. They rushed car resupply, reduce pink tape and provided particular incentives to flood victims.

Each GM and Ford reported September gross sales bumps in Texas. Ford is providing worker pricing to flood victims. In September, that added 5,000 new-vehicle gross sales in Houston, gross sales chief Mark LaNeve mentioned.

In Texas, “Our worker pricing has been extremely fashionable with clients,” he mentioned, “significantly in Houston, the place there was way more widespread car complete losses.”

As information guru Mitchell Phillips of City Science has described, substitute gross sales virtually at all times peak 60 to 90 days after a hurricane, which might put a lot of the Harvey and Irma gross sales elevate within the fourth quarter.

Do not dawdle

However automakers shouldn’t dawdle, Autotrader government analyst Michelle Krebs warns.

“It’ll be a short-lived occasion,” she mentioned. “We noticed a variety of substitute demand in September. We’ll see extra in October and solely somewhat bit in November.”

By December, hurricane substitute will probably be over, she mentioned, including, “The one method we get any elevate in December will probably be if incentives go loopy, like they did final yr.”

Final month, automakers typically tailor-made incentives to filter 2017 fashions and make room for 2018 fashions. Edmunds mentioned 2018 fashions accounted for simply 16 p.c of September gross sales.

Krebs mentioned new and extra focused incentives might have elevated their effectiveness in September. “We’re seeing fewer zero p.c financing and additional cash,” she mentioned. “We’re additionally seeing some lease-pull-ahead offers.”

September incentives remained excessive, nonetheless. Autodata estimated industrywide incentives averaged $three,899 per car, up 5.four p.c from a yr earlier. ALG put the typical incentive at $three,742. Edmunds had the typical spiff at $three,506.

AlixPartner’s Wakefield expects worker pricing for storm victims and different focused incentives to unfold as producers attempt to retain clients and lure new ones — particularly for pickups.

“It’s a conquest alternative in a phase the place buyer loyalty could be very excessive,” he mentioned. “And this can be a time when serving to victims makes [employee pricing] appear to be you’re the good man as a substitute of elevating suspicions that the product needs to be closely discounted.”

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