The excuses for the subpar selling performance at automakers in December (up just 0.3%) were many: the frigid ice and snow storms that scared customers away; a late Thanksgiving holiday that stole sales from the month; and a shortened holiday shopping season that left consumers scrambling to buy holiday gifts for family and friends, as opposed to spending time car shopping. Though the impact of each contributing factor is difficult to measure, we think the combination of these items was the main culprit for disappointing December auto sales, not that the consumer has decided to forgo car purchases and that the upswing in auto sales has come to an abrupt halt.
Some caution is starting to creep into the market—see the comments by Toyota’s (TM) North America CEO here—but we think pent-up demand resulting from consumers delaying purchases during the Great Recession will fuel rapid auto sales expansion for at least the next several years. We estimate that as many as 16+ million new car unit sales from the period 2008-2011 were deferred (calculate the sum of the red notations in the picture below, which reveal that gap from actual reported sales versus the 16 million estimated baseline). Even after adjusting for a shift to used cars during this time period, we don’t think the lost unit sales during the Great Recession are anywhere near being satisfied. Other estimates for roughly 4-5 million in deferred units during the Great Repression appear too low based on the graphical depiction (below), but even these estimates are not yet satisfied, in our view.
Instead, we think the auto industry would have to experience several years above the 16 million mark (the red line in the image below) and maybe even a few above 17 million for the gap caused by the Great Recession to be completely satisfied. In 2013, there were 15.6 million unit sales (not shown in image below) and 16+ million are estimated in 2014. Ford’s (F) planning assumptions for 2014 include a range of 16-17 million in the US, and we think the industry should view this range as a floor for the coming years as long as credit is not constrained (and absent a calamitous economic downturn). We continue to like Ford as a holding in the portfolio of our Best Ideas Newsletter.
Image Source: Car and Driver, Valuentum
We think the best sales year in some time and a positive outlook for 2014 should be the key takeaways for the automaker industry than the month of December, which was mired with one-time negative impacts. Let’s examine some of the highlights.
December Auto Sales Highlights
Ford
Ford brand 2013 retail sales up 14 percent, with cars up 12 percent, utilities up 13 percent, trucks up 17 percent; Ford is best-selling brand for fourth consecutive year
Ford Motor Company total December sales up 2 percent, with retail sales up 3 percent for best December since 2005
Ford Fusion sales up 27 percent for a record December; both Ford Fusion and Ford Fiesta hit annual sales records in 2013
Ford Escape sales up 22 percent, helping the vehicle to an annual sales record in 2013
Ford F-Series tops 70,000 sales following eight straight months of sales above 60,000 vehicles; F-Series now best-selling truck for 37 years and best-selling vehicle for 32 years
General Motors (GM)
GM’s U.S. Dealers Deliver 2.8 Million Vehicles in 2013
Sales in the fourth quarter increased 6 percent and December’s volume was the highest since August.
The Chevrolet Corvette had its best December sales since 2006.
The redesigned Chevrolet Malibu and the all-new Impala were up 33 percent and 10 percent, respectively.
Crossover and SUV sales were strong, with the Chevrolet Traverse and Tahoe, and the GMC Acadia and Yukon XL all posting higher sales.
The Acadia was up 53 percent, for its best-ever December.
Small business customers took delivery of 26,231 vehicles in December up 20 percent. For the year, small business deliveries were up 35 percent.
Honda (HMC)
CR-V annual sales top 300,000 for first time, joining Accord and Civic
Accord posts best annual sales since 2008 with double-digit gain plus strong December
RDX posts 20th straight monthly increase, smashes previous mark with sales up 51.6 percent for the year
MDX has best sales month in model history
Nissan (NSANY)
Nissan Group Reports December and 2013 Year-End US Sales
Nissan Division set annual records in 2013 for total deliveries, as well as Altima, Rogue, Versa, Pathfinder, LEAF, JUKE and NV.
Rogue crossover sales in December were up 27.8 percent to 14,676 in the first full month of sales of the all-new 2014 model.
All-electric Nissan LEAF sales totalled 2,529, up 69.8 percent and marking the best sales month since the model’s launch in Dec. 2010.
Sentra sales were up more than 39.3 percent to 10,799.
Nissan will unveil the Sports Sedan Concept on Jan. 14 at the North American International Auto Show in Detroit.
Toyota
Toyota Division No. 1. Retail Brand in 2013
Camry is best-selling car in America in 2013; Avalon up more than 20 percent in December; posts triple digit gains annually; All-new Corolla records monthly sales of more than 22,500 units; up about 4 percent for the year
TMS hybrids retain about 60 percent of the market and set all-time sales record in 2013; Prius family posts sales of 15,720 units in December
Toyota division trucks record best December since 2007; up nearly 11 percent year-over-year
All-new RAV4 up 46 percent with best-ever December; up 27 percent annually; Highlander posts monthly sales of more than 12,300 units
Toyota division pickups up 12 percent for the year
Tacoma up almost 13 percent annually; All-new Tundra up more than 7 percent in December; up nearly 11 percent year-over-year
All-new Lexus IS posts triple-digit gains in December; up 26.4 for the year; Lexus ES is volume car leader with monthly sales of 8,213 units; up almost 30 percent annually; Lexus RX posts sales of more than 13,000 units in December; up 9 percent over 2012; Lexus GX up 30 percent for the month; up 10 percent for the year
Fiat (FIATY)
45th-consecutive month of year-over-year sales gains
Chrysler Group full-year U.S. sales increase 9 percent in 2013; fourth-consecutive year of annual sales growth
Jeep® and Ram Truck brands each post double-digit sales increases in December compared with same month a year ago
Jeep brand posts best December sales ever with 34 percent sales gain; brand sets global sales record in 2013
All-new 2014 Jeep Cherokee sales top 15,000 units in its second full month of sales; sales up 48 percent compared with previous month of November
Motor Trend selects Ram 1500 as its 2014 Truck of the Year; Ram pickup sales up 11 percent in December
2014 Dodge Dart, Dodge Avenger and Chrysler 200 sedans earn Top Safety Pick ratings from Insurance Institute for Highway Safety
Volkswagen (VLKAY)
Volkswagen reports December 2013 and year-end results
December sales total 34,105 units, second best December since 1972
For the first time in 40 years company delivers over 400,000 vehicles in back-to-back years
High-mileage, TDI® Clean Diesel models account for 17.8 percent in December, 23.5 of sales in 2013 and selling 95,823 units for the year, the best year on record
Chattanooga-built Passat sold 9,254 units in December; 109,652 units for the year
Jetta Sedan sales total 13,719 units in December; 141,259 year-to-date
2013 Beetle and Beetle Convertible achieved 2,819 units in December; 43,134 units for the year
Valuentum’s Take
We’re not reading too much into December auto sales numbers, which weren’t as strong as expected. 2013 was a fantastic year for the automakers, and we think 2014 will be even better. We continue to like Ford as a holding in the portfolio of our Best Ideas Newsletter. Shares are worth more than $20 each, in our view (click for 16-page report).