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Auto Sales Tank Again In June – It’s Worse Than Headline Reports

by Dave Kranzler, Investment Research Dynamics:

June auto sales on a “SAAR” basis (seasonally adjusted annualized rate) fell 1.2% from May to 16.5 million “SAAR.” The non-SAAR number available from sources like Autonews.com show a 3% year over year drop from June 2016. The year over year comparison for the same month eliminates seasonality and it eliminates statistical errors compounded by the annualization calculation.

It was the 6th month in a row that auto sales declined. June’s 16.5 million SAAR was 11.7% below the all-time high of 18.7 million SAAR (December 2016). This is a large decline that is not being given much attention in the financial media.

But it’s worse, especially for the domestic OEMs (GM, Ford, Chrysler). GM’s sales dropped 4.8%, but its car sales plunged 38.2% (truck sales were up 11% with huge incentives). Ford’s sales fell 5%, truck sales were up 2.2% but car sales tanked 23%. Chrysler’s sales were down 7.4%. These numbers are on a year over year basis for June.

Sales are plummeting despite the fact that automakers spent a record amount on cash incentives. Financing terms for the subprime debt being used to pay new cars continues to loosen. The average monthly car payment increased to $517 from $510 in May and the average term rose to a record 69.3 months and the total amount financed hit another all-time high (just under $31,000). You’ll note that subprime delinquency/default rates are starting to approach 2008 levels.

As auto sales decline, auto manufacturing output will decline and production capacity will be shut down. All of this deteriorating economic activity in the sector will affect employment negatively. GM announced last week that its goal is to reduce the days inventory from 105 at the end of June down to 70. Note that GM had previously it would have its days inventory down to 90 by the end of June. The 105 days inventory is an all-time high. The last time it approached this level of June 2007. Clearly the optimism in the industry and on Wall Street is still far too high. With sales declining it will become harder to reduce inventory without substantial production cuts. We can expect another round of big production cuts to be announced in the next 4-8 weeks from the industry, if not sooner.

US Dollar weakness – The U.S. dollar closed Q2 with its biggest quarterly drop in seven years, falling more than 6% during the quarter, which is a huge move for any currency let alone the world’s “reserve” currency. Compounding the bearish message of the dollar’s decline is the fact that this occurred during a period of time when the Fed is supposedly tightening money supply, which should drive the dollar higher.

I would suggest that the dollar’s decline in the context of a “hawkish” Fed reflects the growing systemic dysfunction and fundamental deterioration of the economic, financial and political condition of the United States. At some point the stock market will “take notice” of the falling dollar – as it did in 1987 when the Dow dropped nearly 25% in one day – which will trigger an abrupt sell-off like the two that occurred last week but which, unlike last week, won’t be followed with a “V” bounce the next day.

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4 comments to Auto Sales Tank Again In June – It’s Worse Than Headline Reports

  • RGR 777

    There is a more accurate way to calculate the collapse … IMHO… look at it this way … how many autos do they need to sell to break even… then all of that number is profit all below that number is loss … what is the number …what is the break even number … and I bet all that when you exceed that number by 1/3 in the negative …end of company … period.

    Can we find out that number?

  • Craig Escaped Detroit

    Nope, there is no way that they’d ever publish any real numbers that shows the true state of their business. Same as the banks or all the Wall street fruadsters.

    You’ll never know their condition, until the hour they declare bankruptcy, grabbing the deposits, pensions and other monies, and close the doors. They don’t want anybody to figure out what is coming and take out any money before the big boys have a chance to grab it all.

    And of course, the bankruptcies will be filed, most likely the last hour on a Friday or on a special session weekend when you have no way of accessing YOUR funds.

    The car companies and banks, (like so many other Wall street companies and “gold” ETF’s, Comex, etc), are way too deep in debt and the things they claim as “assets” and collateral, really don’t exist in the real world, and will evaporate like a child support father on the Jerry Springer show when the DNA tests arrive.

    But we do have some indications, by the unsold inventory on dealer’s lots, AND the fact that there are “rebates & discounts” of 10% or higher. No company offers discounts if the products are selling fast and demand is strong. But if demand & sales are weak, then the discounts will be offered as a way to help sell the products. $10,000 discounts on Pickup trucks? That’s amazing.
    Back when certain cars were in big demand (and the economy was good), there were cars that were selling ABOVE the sticker price!!!

    Buckle your silver seat belt, increase your prepper full coverage FOOD insurance, and get ready for the crash. When? No way to see the sink hole in the dark until you’re already over the edge and going down. It’s out there, and we’re headed for it.

    Being well prepped, is like having a big helium balloon tied to your belt, and when our carnival ride goes over the edge into the abyss, everybody else will go straight down, while WE just float above all the people who aren’t tethered to the big weather balloon with a nice, springy bungee cord.

  • Craig Escaped Detroit

    But I’m sure everybody already knows about the things I’m talking about.

    It’s the newcomers who need a quick education.

    The magical mystery tour is waiting to take you away… I am the walrus, Goo goo g’ joo.

    When the Wall St. corporate & bankster joos close the doors and grab all the money, they’ll be holding all the eggs (I am the eggman), and the unprepped zombies will be the dumpster divers looking for a turnip to eat.

    It was amazing they stopped the 2008 crash from hitting the bottom, and there’s no way they can stop the next one from imploding all the way. I wonder if the FEMA camps are on high alert yet?

    Right now, I’m looking at AMAZON selling pages of farmer/garden ROW MULCH COVER to lay on the ground, and plant your stuff thru the holes, it prevents weeds, reflects more light up under the plants, and prevents bugs from laying eggs in the soil next to the stems.
    2000 feet (weighs 40 pounds), costs about $135 (that includes the shipping).

    White on top, black underneath blocks all the light (no weeds can grow) and sturdy enough to pick up at the end of season, and re-use again the next year.
    It’s the best price per foot that I see, and it’s long enough to do all your typical gardens, with plenty left over. I think I’ll appreciate the labor saver.

    And don’t forget some ROW cover fabric.

    My rows will be narrow enough, that I’ll have to cut the row-mulch cover in half, so it’ll be 2ft wide instead of 4ft wide that they need for tractor-harvested fields. So I’ll end up with 4000 ft of cover.

    https://www.amazon.com/dp/B01N6H8WYX/_encoding=UTF8?coliid=I2C86VO3V8LFRN&colid=4E3LAGC2YE4R

  • Eric

    This isn’t helping much.

    20 million ounces of Silver annually just went offline.

    https://www.fool.com/investing/2017/07/06/tahoe-resources-inc-is-getting-clobbered-after-gua.aspx

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