TL;DR: US auto sales are absolutely crushing it. But only because of higher incentives and the hurricanes.
As cited in my previous blog post, Hurricane Irma, Harvey and Maria have catastrophically destroyed assets across the American South/Southeast as well as Puerto Rico. One of the asset classes damaged most were vehicles and, according to JD Power and other industry sources, there will be a need to replace an approximate 700,000 vehicles. Actual September sales consequently posted increases year over year (18.57 million adjusted for annual sales in 2017 vs. 17.72 million adjusted for annual sales in 2016). However, this increase in auto sales is merely a short term stimulus as a result of the hurricane recover efforts by Americans in affected areas. It is expected that the short term stimulus will last until November.
Auto makers also offered higher average incentives - 21% higher than last September at $3,500 for new vehicles. In addition, 6 of the 12 major automakers in the US offered over $4,000 incentives for an average new vehicle, which boosted sales in non-hurricane affected regions. With incentives that total 10% to 20% of the MSRP, how can Americans pass up an opportunity to get a brand new car?
Personally, I believe that the hurricane narrative portrayed by the media is overstated. Consumers respond to $ incentives and the synergetic factors of higher incentives and a need to replace lost vehicles provided the stimulus for September this year. I expect strong sales to continue in the near future in the wake of the hurricanes until about January, when I expect vehicle sales slowly stagnate month over month for the next few years. In addition, with higher incentives, demand for vehicles for the Thanksgiving & holiday season may be accelerated to earlier months.
Check out other blog posts at my website: www.driftingvalue.com