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back to index backAMERItalk November,  2016


US SAAR Likely Finishes Ahead of Estimates for Second Consecutive Month

US SAAR is estimated to finish at 17.9 million in October versus analyst estimates of 17.7 million (2nd consecutive beat). This includes an estimate for Ford (est. -12% yoy) that is consistent with its industry underperformance in recent months. Based on most optimistic estimates for Ford (down 2%), we believe the industry could finish up to 18.3 million. We expect the market to remain near L3M trend of 17.5 million units over the next several years as solid consumer metrics (employment, income, confidence) support market demand.

- US SAAR is estimated to finish at 17.9 million versus analyst estimates of 17.7 million. In units, sales declined 6% yoy (+2% adjusted for selling days) with low-single-digit growth in trucks offset by a 15% decline in car demand. These figures include an estimate for Ford (est. down 12% yoy), which announced that its sales figures would be delayed after a fire at headquarters. Ford estimates are consistent with the 500-600bps sales performance gap versus the market over the past three months. We continue to see evidence that the market remains at a high level with L3M SAAR of 17.5 million firmly in the 2 year range of 16.5-18.0 million.

- October sales detail
----- OEMs gaining share: Subaru (+4% yoy), Hyundai (+1%), GM (-2%)
----- OEMs losing share: BMW (-17% yoy), VW (-12%), Ford (-12%)
----- Performance by propulsion: Gas (-6% yoy), Hybrid/EV (-6%), Diesel (-4%)
----- Other North American countries: Canada (-2% in Q3) and Mexico (+19% in Q3).

- Q4 production schedules hold steady. Q4 production schedules still call for 1% growth, modestly above our estimate for a 1% decline. Production schedules remained roughly flat due to a larger contribution from new plants coming on-line (Hyundai, VW light trucks) and GM trucks, partially offset by declines at FCA and Ford.

- Discussion on hot topics” (inventory, incentives).

----- Inventory. As discussed in last month’s North America production note (link), inventories at domestic automakers are roughly 10% above normal. General Motors inventories moved up 5 days sequentially to 86 days. On its Q3 call, GM said that it expects to maintain higher-than-normal inventories in the coming months to support new launches. We will have final inventory levels for all automakers over the next several weeks.

----- Incentives. TrueCar estimates that incentives as a percentage of sales declined 30bps sequentially (+120bps yoy) to 10.7%, modestly above the 2011-2015 range of 8-10%. With that said, in dollars, incentives increased roughly $500 yoy versus ATPs up $800-900 yoy.

To download 7-page report, please click here.

Source: BAIRD
- GAI




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