Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

Japan Automobiles / Thematic (Sector/Industry)

<p>May U.S. SAAR came in at 16.7m units, down from 16.8m units in April and 17.1m units in May, 2016.  According to D3 discussions of monthly sales, <strong>weak fleet deliveries accounted for the SAAR weakness, with retail sales holding steady.</strong>  Historical seasonality in fleet deliveries make this reasonable but with retail demand showing signs of plateauing, average SAAR in 2H17 may actually point to an overall weakening in U.S. SAAR.  </p><div><div class="content-highlight"><div><strong>Car-truck industry mix shift most favors the D3 and least favors Korean OEMs</strong>. D3 Cars in the mix stands at 13-27% while Japanese OEM car mix range in the low to mid 40% range.  The losers in the industry mix shift have been the Korean OEMs with 66-69% cars in their mix.  This factor along with an ageing product line accounts for much of the share erosion and incentive rise at Korean OEMs which media has focused its attention on recently.  </div><div><strong>From a product cycle perspective 2H17 begins a new launch cycle for the Hyundai Motor Group (tailwind) but addressing the unfavorable mix issue will be one of the most important strategic challenges for the HM Group (headwind).</strong></div></div></div>

May U.S. SAAR came in at 16.7m units, down from 16.8m units in April and 17.1m units in May, 2016.  According to D3 discussions of monthly sales, weak fleet deliveries accounted for the SAAR weakness, with retail sales holding steady.  Historical seasonality in fleet deliveries make this reasonable but with retail demand showing signs of plateauing, average SAAR in 2H17 may actually point to an overall weakening in U.S. SAAR.  Car-truck industry mix shift most favors the D3 and least favors Korean OEMs. D3 Cars in the mix stands at 13-27% while Japanese OEM car mix range in the low to mid 40% range.  The losers in the industry mix shift have been the Korean OEMs with 66-69% cars in their mix.  This factor along with an ageing product line accounts for much of the share erosion and incentive rise at Korean OEMs which media has focused its attention on recently.  From a product cycle perspective 2H17 begins a new launch cycle for the Hyundai Motor Group (tailwind) but addressing the unfavorable mix issue will be one of the most important strategic challenges for the HM Group (headwind).

May US SAAR Weakens on Lower Fleet Mix - Industry Mix Most Favors D3 and Least Favors Korean OEMs