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Hurricane Surge Fades: October Auto Sales Mixed As GM Inventory Starts To Tick Back Up

U.S. auto sales for the month of October came in mostly mixed with Fiat and GM being the biggest losers relative to street estimates and Ford beating on strong truck and fleet sales.  GM forecasts that the overall SAAR for the month ended up around 18mm units, versus 17.5mm expected, as sales remain elevated due to hurricane-related replacements.  Here's more from Detroit News:

General Motors Co. and Fiat Chrysler Automobiles NV on Wednesday reported sales declines in October, while Ford Motor Co. saw sales jump 6.2 percent compared to the same month a year ago thanks to strong truck and fleet sales.

 

Fiat Chrysler reported a 13 percent drop compared to the same month a year ago, due to a 43 percent decline in fleet sales compared to last year. GM sales fell 2.2 percent due largely to slumping Buick and Chevrolet deliveries; only the automaker’s GMC brand saw a bump in sales last month, up 4.6 percent.

 

But overall, analysts expect a relatively strong sales month due to buyers in the Texas and Florida replacing storm-damaged vehicles, and generous sales incentives being offered by carmakers.

 

GM reported it sold 252,813 vehicles last month, with pickups up 9 percent to 84,902, and crossover sales were up 12 percent. Fiat Chrysler sold 153,373 vehicles in October. Retail sales fell 4 percent, though the company’s Ram and Jeep brands had strong months, according to the automaker. Ford sold 200,436 vehicles; 93,248 of those were trucks.

Of course, more important than the headline numbers, which are skewed by the recent hurricanes, is the fact that incentive spending continues to rise despite abnormally strong demand and production cuts already implemented earlier this year.

“Although the headline shows a small decline in sales, October looks relatively strong for the industry, as evidenced by the nearly 18 million (seasonally adjusted annual rate),” said Tim Fleming, analyst for Kelley Blue Book.

 

Fleming said some of the strength can be attributed to replacement demand that continues in Texas and Florida due to hurricanes. Perhaps more importantly, he said, higher incentive-spending by carmakers is playing a role: “Even with production cuts this year, incentives are on the rise and have reached 11 percent of average transaction prices. This is an indicator that new-vehicle demand is still contracting, and production cuts could be on the horizon to prevent oversupplies.”

 

Analysts at Edmunds forecast a steeper year-over-year decline at 3.5 percent. But the automakers will still see a lift from vehicle recovery sales due to hurricane season.

 

“While replacement demand in Houston was higher in September, we anticipate that hurricane recovery efforts will continue to supplement October vehicle sales in the market,” said Jessica Caldwell, Edmunds executive director of industry analysis. “In Florida, far fewer vehicles were lost to flood damage, but we expect to see an incremental boost in vehicle sales primarily from shoppers who may have delayed their purchases due to the storm.”

Meanwhile, despite the best hopes of wall street that recent hurricanes would help solve GM's inventory problem, the company's inventory days actually crept up in October compared to the previous month.

And here are more highlights from Stone McCarthy Research on the breakdown of car/truck sales mix for the month:

Car sales and truck sales are both coming in below expectations so far. Part of the reason for last month's strength in car sales was due to fleet sales, so we expect to see some of the replacement sales after Hurricanes Irma and Harvey showing up more in this month. Given their sales figures, domestic light vehicle sales for October look to be at about 13.8 million units, below that of the 14.1 million selling pace of September.

 

General Motors domestic car sales came in below our expectations, and were down over 23% from last year. Domestic light truck sales for GM in October were in line with our estimate, and were up 3.5% from last year.

 

Domestic car sales were also weaker than we expected for Ford, though they saw the smallest year over year decline of the big three. Ford's domestic light truck sales were a bit stronger than we expected. Their 12.3% year over year rise was the largest of the big three.

 

Chrysler domestic car were also a bit lower than we expected, and were also down about 23% year over year. Their light truck sales saw a decline of over 10% from last year, just as we expected them to.

 

Honda, Toyota, and Volkswagen sales all came in below our expectations.

 

Including the Detroit Three, we project the selling pace for domestic cars in October to come to 4.71 million units (saar) versus 4.91 million in September. We expect car sales to decline 6.6% from last October. We look for the selling pace for October light trucks to reach a 9.07 million unit selling pace (saar), compared to September's 9.15 million selling pace, a 0.1% decrease in light truck sales from last October.

So what say you?  Still time to buy the hurricane/incentive/subprime-fueled demand surge in auto sales or time to move on?