Global Auto Demand Tracker: 1Q SAAR in Key Regions Suggests Demand Growth May Be Slowing Down

Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

United states Automobiles / Thematic (Sector/Industry)

<p>March SAAR came in at 17.48m units, up 2.3% sequentially but down by 3.2% YoY.  Average transaction price and average incentives rose, with the pace of light truck incentive spending now significantly outpacing those of cars.  Here are some initial observations for the month from our end:</p><ul><li>Average YTD SAAR stands at 17.2m units, which represents flat growth on an annualized basis.  Retail-fleet mix does not seem to have changed from 1Q17, based on observations of the first 3 weeks of industry sales trend observed by industry sources.</li><li>Crossover segment share of the total industry reached 34.4% in 1Q18, from 29.7% in 1Q17 and 31.1% in FY17.  However, Asian brands share of the segment fell to 49.6% in 1Q18 from 52.2% in 1Q17 and 53.5% in FY17.  Hence, it is clear that the crossover theme that provided tailwinds for Asian brand sentiment in 2017 may no longer be valid for 2018.</li><li>Industry mix in March for light trucks reached 66.4%, down from the high of 67.7% in December 2017.</li><li>Average light truck incentives in 1Q18 rose by 8.9% YoY while car incentives rose by 2.9% over the same period.  Average incentives / Average transaction price in the month came to 10.8%, the highest seen since August 2017, according to our observations.</li><li>Hyundai-Kia's share of the market rose to 6.8% sequentially in March, helped by improving mix.  Light truck mix for Hyundai-Kia rose to 37.6% in 1Q18 from 31% in 1Q17 and 34.8% in FY17.  While this is significantly lower than the 66% for the industry, Hyundai especially has been growing its crossover segment presence at a faster pace than segment growth</li></ul><p>While D3 are clearly market leaders in the current U.S. market environment, we think Hyundai-Kia's growing presence in the crossover segment should be watched carefully over the course of the year. </p>

March SAAR came in at 17.48m units, up 2.3% sequentially but down by 3.2% YoY.  Average transaction price and average incentives rose, with the pace of light truck incentive spending now significantly outpacing those of cars.  Here are some initial observations for the month from our end:Average YTD SAAR stands at 17.2m units, which represents flat growth on an annualized basis.  Retail-fleet mix does not seem to have changed from 1Q17, based on observations of the first 3 weeks of industry sales trend observed by industry sources.Crossover segment share of the total industry reached 34.4% in 1Q18, from 29.7% in 1Q17 and 31.1% in FY17.  However, Asian brands share of the segment fell to 49.6% in 1Q18 from 52.2% in 1Q17 and 53.5% in FY17.  Hence, it is clear that the crossover theme that provided tailwinds for Asian brand sentiment in 2017 may no longer be valid for 2018.Industry mix in March for light trucks reached 66.4%, down from the high of 67.7% in December 2017.Average light truck incentives in 1Q18 rose by 8.9% YoY while car incentives rose by 2.9% over the same period.  Average incentives / Average transaction price in the month came to 10.8%, the highest seen since August 2017, according to our observations.Hyundai-Kia's share of the market rose to 6.8% sequentially in March, helped by improving mix.  Light truck mix for Hyundai-Kia rose to 37.6% in 1Q18 from 31% in 1Q17 and 34.8% in FY17.  While this is significantly lower than the 66% for the industry, Hyundai especially has been growing its crossover segment presence at a faster pace than segment growthWhile D3 are clearly market leaders in the current U.S. market environment, we think Hyundai-Kia's growing presence in the crossover segment should be watched carefully over the course of the year. 

March U.S. Auto Demand: 17.48m SAAR with Truck Incentives Far Outpacing Car Incentives