Economic Factors a Concern for October Automotive Industry Deliveries

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Submitted by Julie Young as part of our contributors program.

Economic Factors a Concern for October Automotive Industry Deliveries

In September U.S. auto deliveries were down 4.2% from the same month last year. Deliveries, however, were up 8.1% year-to-date from 2012. In September deliveries reported were 1.139 million down from 1.189 million in September 2012. September 2013 deliveries brought the calendar year total to 11.787 million.

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September deliveries followed a strong month in August which included sales from the Labor Day weekend. The slight slowdown in September caused a 5% decrease in the seasonally adjusted annual rate which fell from 16.09 million in August to 15.28 million in September.

In September Ford and General Motors were the leading U.S. light vehicle providers representing 33% of total U.S. deliveries. Ford’s September total increased 6% to 184,452 while General Motors’ September deliveries were down 11% at 187,195. Both companies are on pace to show annual year-over-year improvements from 2012 with 12% and 8% year-to-date increases, respectively.

Ford continued to show strong sales in its fuel efficient vehicles. Ford Fusion sales accounted for 37% of Ford brand cars in September 2013. At 19,972 September 2013 sales were up 62% from September 2012. The C-MAX Hybrid also had a strong month increasing sales to 2,182, up 125% from September 2012. Industry leading profit margins and a focus on fuel efficiency has helped Ford remain a U.S. industry leader in the post-recession environment. For the five-year period ending October 4 the stock has gained 321.98%. Year-to-date it has returned 31.97%.

General Motors’ sales were down slightly in September at 187,195 but still showed a strong year-to-date increase of 8%. Accounting for the greatest portion of U.S. sales in September at 16.4% the U.S. automaker continues to emerge from its 2009 bankruptcy. In 2013 the government’s ownership of General Motors stock has been reduced to 101 million shares and in September plans to sell additional shares were also disclosed. The reduction in government ownership and steady sales for the company have helped its stock to return 23.82% year-to-date.

Overall, despite setbacks in September due to the Labor Day holiday, automotive sales are also struggling with Detroit’s bankruptcy and the government shutdown as well as decreased consumer confidence. These factors could negatively influence October sales causing a bleaker outlook for the end of the year than previously expected.

Detroit’s bankruptcy filed in July 2013 will have some indirect effects on the automotive industry. Ford, General Motors and Chrysler, all with factories in the Detroit area, will face some of the city’s hardships which include decreased government funding and subsidies. The short-term government shutdown is also expected to slow demand in October due to furloughed workers and decreased production of government vehicles.

Economic factors are weighing on consumers’ confidence which fell in September according to the Thomson Reuters/University of Michigan Index of Consumer Sentiment. According to the September Consumer Sentiment Index results consumer confidence fell to 77.5 from 82.1 in August. In September consumers were concerned about a government shutdown and the potential for debt defaults, both factors that continue to remain at high risk through October.

Overall, industry analysts remain upbeat on the fourth quarter outlook with an end of the year sales consensus estimate of 15.6 million. However, another down month in October and the effects of continued government policy debates could likely lead to a downgrade of these expectations in the remaining months of the year.

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