Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

United states Automobiles / Thematic (Sector/Industry)

<p>August SAAR of 17.07m units (+0.8% YoY, +1.1% MoM) were driven largely by two factors according to our observations: Rising incentives and the beginning of the Labor Day weekend falling into the end of August.  Here are some or our impressions from August and expectations for the remainder of the calendar year:</p><ul>
<li>Rising Average Transaction Price (ATP) has been seeing a concurrent rise in average incentives, and August was no exception.  As we have noted in our previous writings, the rise in ATP should not be seen as rising pricing power of OEMs but as a reflection of mix shift resulting from continued buyer migration to light trucks and weakening demand for compact cars.</li>
<li>Days inventory continues to indicate a downward trend but the divergence between light truck and car inventory levels continued to be seen in August.  Given incentive levels, however, we would have expected to see a sharper de-stocking pattern at the retail inventory level.</li>
<li>According to JD Powers' fleet/retail mix estimates for the first 21 calendar days of August, retail SAAR likely fell on MoM basis, although this estimate will have to be confirmed once the full month details are out.</li>
<li>While media reports highlighted the rise in EV sales in the industry on a YoY basis, the rise is mostly attributable to the sales of the Tesla Model 3, despite indications that monthly sales have come down to the 10-12k units/month range after hitting a high of 15k units/month in December '18 - January '19 period.</li>
</ul><p>There remain uncertainties about the potential impact of the Hurricane Dorian in September, and the last time that Labor Day weekend started off in August in 2014, September saw a noticeable drop in light vehicle demand. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/177/original/Screen%20Shot%202019-09-05%20at%205.42.38%20PM.png?1567730580" class="editor-image img-responsive" data-smartkarma-image-id="98177"></figure><div class="content-caption">Sources: Autodata, Kelley Bluebook</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/217/original/Screen%20Shot%202019-09-05%20at%209.52.05%20PM.png?1567745544" class="editor-image img-responsive" data-smartkarma-image-id="98217"></figure><div class="content-caption">Source: Autodata</div>

August SAAR of 17.07m units (+0.8% YoY, +1.1% MoM) were driven largely by two factors according to our observations: Rising incentives and the beginning of the Labor Day weekend falling into the end of August.  Here are some or our impressions from August and expectations for the remainder of the calendar year:
Rising Average Transaction Price (ATP) has been seeing a concurrent rise in average incentives, and August was no exception.  As we have noted in our previous writings, the rise in ATP should not be seen as rising pricing power of OEMs but as a reflection of mix shift resulting from continued buyer migration to light trucks and weakening demand for compact cars.
Days inventory continues to indicate a downward trend but the divergence between light truck and car inventory levels continued to be seen in August.  Given incentive levels, however, we would have expected to see a sharper de-stocking pattern at the retail inventory level.
According to JD Powers' fleet/retail mix estimates for the first 21 calendar days of August, retail SAAR likely fell on MoM basis, although this estimate will have to be confirmed once the full month details are out.
While media reports highlighted the rise in EV sales in the industry on a YoY basis, the rise is mostly attributable to the sales of the Tesla Model 3, despite indications that monthly sales have come down to the 10-12k units/month range after hitting a high of 15k units/month in December '18 - January '19 period.
There remain uncertainties about the potential impact of the Hurricane Dorian in September, and the last time that Labor Day weekend started off in August in 2014, September saw a noticeable drop in light vehicle demand. Sources: Autodata, Kelley BluebookSource: Autodata

US Auto Demand in August: Strong U.S. SAAR Driven by Labor Day Weekend Kickoff