Auto sales posted a slight headline miss for February 2017 with an actual SAAR of 17.5mm vs. expectations of 17.7mm, despite a huge surge in incentive spending YoY. Individual company results were decidedly mixed with GM and Ford both posting small beats while Chrysler/Toyota/Honda missed.
As the Detroit News noted, consumers continue to drive a mix shift to trucks and SUVs away from cars (you know, because gas is basically free now so why not?) which is resulting in a bit of a small car inventory issue (and by a "bit" we mean 'yuge'). Ford told analysts on their sales call earlier today that car sales were expected to represent roughly 35% of overall industry volumes in February, down nearly 20 points from 53% in 2010.
Automakers report they continue to see consumers shift preferences toward trucks and SUVs, which is cutting into the sales of cars. Ford reported February car sales fell 24 percent from the same month a year ago -- a trend it doesn't expect to see change anytime soon. GM also said car sales slid 22.7 percent, while Nissan North America Inc. said car sales fell 12 percent and Toyota Motor North America, Inc. ?car sales dropped 17.2 percent last month compared to February 2016.
Ford in a call with analysts and reporters Wednesday said it expects car sales for the industry will represent around 35 percent of overall industry sales in February. That's down from 53 percent in 2010, the Dearborn automaker said.
With that, here's how your favorite OEM performed in February 2017:
Of course, the real story continues to be the level of incentive spending required from the OEMs to produce these "record" sales numbers. Unfortunately, as the table from ALG below reveals, the answer is, well, a lot. In fact, ALG forecasts that overall industry incentives were up 14% YoY with Ford up 24%, GM up 13% and Honda up 46%.
Meanwhile, as AlixPartners' Mark Wakefield told Reuters, this kind of incentive spending reflects "top of the cycle stuff."
However, analysts pointed to caution flags in the latest results, including discounts that hit 10 percent of the average selling price for February, according to three companies that track vehicle pricing.
"With the industry at 10 percent you are in a push market," said Mark Wakefield, head of the North American automotive practice for consultancy AlixPartners. "This is top cycle stuff." In a push market, manufacturers try to unload vehicles, rather than respond to the pull of consumer demand.
The challenge now for automakers is to avoid over-producing vehicles or launching a price war that could undermine profits, especially as rising interest rates make it more expensive to subsidize loans and leases, Wakefield said.
"It's that fine balance," he said. "How much can I push the boundary without prompting a reaction that pulls all of us down?"
Meanwhile, despite the record levels of incentive spending, dealers still can't seem to move inventory off theirs lots quick enough to offset new shipments from the OEMs which has pushed inventory days back to highs not seen since 2009.
But at least that SAAR number remains elevated...
No bubble to see here folks...move along.