Global Auto Demand Tracker: U.S. SAAR Looks Set to Fall in 2H18

Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

United states Automobiles / Thematic (Sector/Industry)

<p>July SAAR of 16.77m units came within range of the 16.7m average SAAR we are expecting in 3Q18 (see <a href="https://www.smartkarma.com/insights/global-auto-demand-tracker-u-s-saar-looks-set-to-fall-in-2h18" target="_blank" data-smartkarma-citation="insights:21460">Global Auto Demand Tracker: U.S. SAAR Looks Set to Fall in 2H18</a>).   Here are some of our impressions on the July sales figures:</p><ul>
<li>Ford's internal analysis, according to the company, suggests that benefits of the 4th of July holidays which came mid-week, came in the last week of June rather than in the first week of July, which also helps to explain the strength of July's selling rate of 17.47m units.</li>
<li>Light truck mix reached 68.3% in July, the highest it has ever been, but mostly because of the magnitude of car sales decline.  Concurrently, car incentives industry-wide fell sequentially, mostly from Asian brands focusing incentive spending on light trucks.</li>
<li>Total retail inventory fell sequentially as did days supply in July.</li>
<li>In market share terms, July was almost a zero sum game between D3 and J3, with D3 losing share in both cars and trucks.  It should also be noted that Asian brands have been more aggressive in light truck incentives than D3 in both July and on YTD basis.</li>
<li>The fall in SAAR was broad and across the board in the month of July, with retail-fleet mix tracked through the first 3 weeks suggesting that weakness came mostly from the retail side.  </li>
</ul><p>The sales decline impacted just about every maker in July, so share gains during the month mostly meant less decline.  We have been emphasizing that US SAAR has been at above long term trend level of 15.6m units for quite some time now.  We continue to believe at this point that 2H18 SAAR will likely be weaker on average than in 1H18.</p>

July SAAR of 16.77m units came within range of the 16.7m average SAAR we are expecting in 3Q18 (see Global Auto Demand Tracker: U.S. SAAR Looks Set to Fall in 2H18).   Here are some of our impressions on the July sales figures:
Ford's internal analysis, according to the company, suggests that benefits of the 4th of July holidays which came mid-week, came in the last week of June rather than in the first week of July, which also helps to explain the strength of July's selling rate of 17.47m units.
Light truck mix reached 68.3% in July, the highest it has ever been, but mostly because of the magnitude of car sales decline.  Concurrently, car incentives industry-wide fell sequentially, mostly from Asian brands focusing incentive spending on light trucks.
Total retail inventory fell sequentially as did days supply in July.
In market share terms, July was almost a zero sum game between D3 and J3, with D3 losing share in both cars and trucks.  It should also be noted that Asian brands have been more aggressive in light truck incentives than D3 in both July and on YTD basis.
The fall in SAAR was broad and across the board in the month of July, with retail-fleet mix tracked through the first 3 weeks suggesting that weakness came mostly from the retail side.  
The sales decline impacted just about every maker in July, so share gains during the month mostly meant less decline.  We have been emphasizing that US SAAR has been at above long term trend level of 15.6m units for quite some time now.  We continue to believe at this point that 2H18 SAAR will likely be weaker on average than in 1H18.

July U.S. Auto Demand: Weak SAAR Suggests 4th of July Benefits Were Taken in June