Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

United states Automobiles / Thematic (Sector/Industry)

January Light Vehicle SAAR came in at 16.7m units, down 4.8% sequentially and down 2.8% YoY.  Much of the weakness have been anecdotally attributed to bad weather and the government shutdown by media and analyst reports.  Here are some initial thoughts:<ul>
<li>Light trucks in the industry mix fell to 68.1% in January from 71.6% in December, but up from 67.1% in January 2017. Car sales were down by 4.8% YoY while light truck sales were down by 0.5% YoY.  Since both bad weather and the impact of government shutdowns were most likely felt most severely in D3's traditional regions of strength, D3 loss of volumes were more severe than Asian and European brands as a group.  While some industry commentators were quick to assume the car-light truck mix shift may begin to shift, we will wait for sales to stabilize in the coming months from the effects of both the weather and the government shutdown.</li>
<li>At the same time, D3's share of crossovers improve while Asian brand share of the segment deteriorated, led by volume loss at Toyota, Nissan and Mazda.</li>
<li>While overall incentives were down both sequentially and on YoY bases, anecdotal evidence suggest that it is not the price discounts and rebates but lower monthly payments that have been targeted by brands to lure customers into showrooms.  The Fed's trackings of auto loan maturity is not yet available for 4Q18 nd 1Q19, and while loan maturity was coming down in 2018 compared with 2017, from a decade-long perspective both average amount financed and loan maturity have been increasing based on our observations.    In any event, if reported numbers corroborate the initial takes from pundits, we believe the industry picture is not healthy.</li>
<li>
Notable Share Gainers: Ford, FCA, Tesla, Honda, Mitsubishi, Subaru, Hyundai-Kia grew volumes on YoY bases.  Only Porsche and Rolls grew their unit sales on both sequential and YoY bases, however.</li>
<li>
Notable Share Losers: GM, Toyota, Nissan, Mazda, VW-Audi, Mercedes and BMW on YoY bases.</li>
</ul>We maintain our view that the biggest headwind we see in 2019 in terms of U.S. auto demand is currently wealth effect and the slowing real estate market that is likely to pose headwinds to consumer sentiment.  We maintain our expectations for a low-mid 16m unit range SAAR in FY19 and advise investors to look for clues in the coming months that may suggest that the light truck mix has peaked.  <table class="table table-striped"><tbody>
<tr><td colspan="15" style="text-align: center;">January 2019 Sales &amp; Market Share Summary </td></tr>
<tr>
<td colspan="8" style="text-align: center;">January '19 Sales &amp; Market Share Summary </td>
<td colspan="7" style="text-align: center;">January '18 Sales &amp; Market Share Summary </td>
</tr>
<tr>
<td>('000 Units)</td>
<td style="text-align: center;">Cars</td>
<td style="text-align: center;">Mkt shr</td>
<td style="text-align: center;">Trucks</td>
<td style="text-align: center;">Mkt shr</td>
<td style="text-align: center;">Total</td>
<td style="text-align: center;">Mkt Shr</td>
<td style="text-align: center;">Truck Mix</td>
<td style="text-align: center;">Cars</td>
<td style="text-align: center;">Mkt shr</td>
<td style="text-align: center;">Trucks</td>
<td style="text-align: center;">Mkt shr</td>
<td style="text-align: center;">Total</td>
<td style="text-align: center;">Mkt shr</td>
<td style="text-align: center;">Truck Mix</td>
</tr>
<tr>
<td>GM</td>
<td style="text-align: center;">34.7</td>
<td style="text-align: center;">9.6%</td>
<td style="text-align: center;">150.1</td>
<td style="text-align: center;">19.5%</td>
<td style="text-align: center;">184.8</td>
<td style="text-align: center;">16.3%</td>
<td style="text-align: center;">81.2%</td>
<td style="text-align: center;">36.2</td>
<td style="text-align: center;">9.5%</td>
<td style="text-align: center;">162.2</td>
<td style="text-align: center;">20.9%</td>
<td style="text-align: center;">198.4</td>
<td style="text-align: center;">17.2%</td>
<td style="text-align: center;">81.8%</td>
</tr>
<tr>
<td>Ford</td>
<td style="text-align: center;">31.1</td>
<td style="text-align: center;">8.6%</td>
<td style="text-align: center;">140.6</td>
<td style="text-align: center;">18.2%</td>
<td style="text-align: center;">171.8</td>
<td style="text-align: center;">15.2%</td>
<td style="text-align: center;">81.9%</td>
<td style="text-align: center;">31.7</td>
<td style="text-align: center;">8.3%</td>
<td style="text-align: center;">128.8</td>
<td style="text-align: center;">16.6%</td>
<td style="text-align: center;">160.4</td>
<td style="text-align: center;">13.9%</td>
<td style="text-align: center;">80.3%</td>
</tr>
<tr>
<td>FiatChrysler</td>
<td style="text-align: center;">10.5</td>
<td style="text-align: center;">2.9%</td>
<td style="text-align: center;">123.6</td>
<td style="text-align: center;">16.0%</td>
<td style="text-align: center;">134.2</td>
<td style="text-align: center;">11.8%</td>
<td style="text-align: center;">92.1%</td>
<td style="text-align: center;">11.3</td>
<td style="text-align: center;">3.0%</td>
<td style="text-align: center;">118.7</td>
<td style="text-align: center;">15.3%</td>
<td style="text-align: center;">129.9</td>
<td style="text-align: center;">11.3%</td>
<td style="text-align: center;">91.3%</td>
</tr>
<tr>
<td>Toyota</td>
<td style="text-align: center;">60.8</td>
<td style="text-align: center;">16.8%</td>
<td style="text-align: center;">95.2</td>
<td style="text-align: center;">12.4%</td>
<td style="text-align: center;">156.0</td>
<td style="text-align: center;">13.8%</td>
<td style="text-align: center;">61.0%</td>
<td style="text-align: center;">64.3</td>
<td style="text-align: center;">16.9%</td>
<td style="text-align: center;">102.7</td>
<td style="text-align: center;">13.3%</td>
<td style="text-align: center;">167.1</td>
<td style="text-align: center;">14.5%</td>
<td style="text-align: center;">61.5%</td>
</tr>
<tr>
<td>Honda</td>
<td style="text-align: center;">47.4</td>
<td style="text-align: center;">13.1%</td>
<td style="text-align: center;">58.7</td>
<td style="text-align: center;">7.6%</td>
<td style="text-align: center;">106.1</td>
<td style="text-align: center;">9.4%</td>
<td style="text-align: center;">55.3%</td>
<td style="text-align: center;">48.2</td>
<td style="text-align: center;">12.7%</td>
<td style="text-align: center;">56.3</td>
<td style="text-align: center;">7.3%</td>
<td style="text-align: center;">104.5</td>
<td style="text-align: center;">9.1%</td>
<td style="text-align: center;">53.9%</td>
</tr>
<tr>
<td>Nissan*</td>
<td style="text-align: center;">40.2</td>
<td style="text-align: center;">11.1%</td>
<td style="text-align: center;">60.6</td>
<td style="text-align: center;">7.9%</td>
<td style="text-align: center;">100.7</td>
<td style="text-align: center;">8.9%</td>
<td style="text-align: center;">60.1%</td>
<td style="text-align: center;">53.8</td>
<td style="text-align: center;">14.2%</td>
<td style="text-align: center;">69.7</td>
<td style="text-align: center;">9.0%</td>
<td style="text-align: center;">123.5</td>
<td style="text-align: center;">10.7%</td>
<td style="text-align: center;">56.4%</td>
</tr>
<tr>
<td>Hyundai</td>
<td style="text-align: center;">21.0</td>
<td style="text-align: center;">5.8%</td>
<td style="text-align: center;">21.0</td>
<td style="text-align: center;">2.7%</td>
<td style="text-align: center;">42.0</td>
<td style="text-align: center;">3.7%</td>
<td style="text-align: center;">50.0%</td>
<td style="text-align: center;">25.9</td>
<td style="text-align: center;">6.8%</td>
<td style="text-align: center;">15.3</td>
<td style="text-align: center;">2.0%</td>
<td style="text-align: center;">41.2</td>
<td style="text-align: center;">3.6%</td>
<td style="text-align: center;">37.1%</td>
</tr>
<tr>
<td>Kia</td>
<td style="text-align: center;">23.3</td>
<td style="text-align: center;">6.4%</td>
<td style="text-align: center;">14.0</td>
<td style="text-align: center;">1.8%</td>
<td style="text-align: center;">37.4</td>
<td style="text-align: center;">3.3%</td>
<td style="text-align: center;">37.6%</td>
<td style="text-align: center;">22.8</td>
<td style="text-align: center;">6.0%</td>
<td style="text-align: center;">12.9</td>
<td style="text-align: center;">1.7%</td>
<td style="text-align: center;">35.6</td>
<td style="text-align: center;">3.1%</td>
<td style="text-align: center;">36.1%</td>
</tr>
<tr>
<td>Other Asian</td>
<td style="text-align: center;">27.7</td>
<td style="text-align: center;">7.6%</td>
<td style="text-align: center;">47.2</td>
<td style="text-align: center;">6.1%</td>
<td style="text-align: center;">74.8</td>
<td style="text-align: center;">6.6%</td>
<td style="text-align: center;">63.0%</td>
<td style="text-align: center;">33.7</td>
<td style="text-align: center;">8.9%</td>
<td style="text-align: center;">44.1</td>
<td style="text-align: center;">5.7%</td>
<td style="text-align: center;">77.8</td>
<td style="text-align: center;">6.7%</td>
<td style="text-align: center;">56.7%</td>
</tr>
<tr>
<td>Other</td>
<td style="text-align: center;">65.2</td>
<td style="text-align: center;">18.0%</td>
<td style="text-align: center;">59.9</td>
<td style="text-align: center;">7.8%</td>
<td style="text-align: center;">125.1</td>
<td style="text-align: center;">11.0%</td>
<td style="text-align: center;">47.9%</td>
<td style="text-align: center;">52.2</td>
<td style="text-align: center;">13.7%</td>
<td style="text-align: center;">64.2</td>
<td style="text-align: center;">8.3%</td>
<td style="text-align: center;">116.4</td>
<td style="text-align: center;">10.1%</td>
<td style="text-align: center;">55.1%</td>
</tr>
<tr>
<td>Total</td>
<td style="text-align: center;">361.9</td>
<td style="text-align: center;"> </td>
<td style="text-align: center;">771.0</td>
<td style="text-align: center;"> </td>
<td style="text-align: center;">1,132.9</td>
<td style="text-align: center;"> </td>
<td style="text-align: center;">68.1%</td>
<td style="text-align: center;">380.0</td>
<td style="text-align: center;"> </td>
<td style="text-align: center;">774.9</td>
<td style="text-align: center;"> </td>
<td style="text-align: center;">1,154.9</td>
<td style="text-align: center;"> </td>
<td style="text-align: center;">67.1%</td>
</tr>
</tbody></table><div class="content-caption">Source: Autodata</div>

January Light Vehicle SAAR came in at 16.7m units, down 4.8% sequentially and down 2.8% YoY.  Much of the weakness have been anecdotally attributed to bad weather and the government shutdown by media and analyst reports.  Here are some initial thoughts:
Light trucks in the industry mix fell to 68.1% in January from 71.6% in December, but up from 67.1% in January 2017. Car sales were down by 4.8% YoY while light truck sales were down by 0.5% YoY.  Since both bad weather and the impact of government shutdowns were most likely felt most severely in D3's traditional regions of strength, D3 loss of volumes were more severe than Asian and European brands as a group.  While some industry commentators were quick to assume the car-light truck mix shift may begin to shift, we will wait for sales to stabilize in the coming months from the effects of both the weather and the government shutdown.
At the same time, D3's share of crossovers improve while Asian brand share of the segment deteriorated, led by volume loss at Toyota, Nissan and Mazda.
While overall incentives were down both sequentially and on YoY bases, anecdotal evidence suggest that it is not the price discounts and rebates but lower monthly payments that have been targeted by brands to lure customers into showrooms.  The Fed's trackings of auto loan maturity is not yet available for 4Q18 nd 1Q19, and while loan maturity was coming down in 2018 compared with 2017, from a decade-long perspective both average amount financed and loan maturity have been increasing based on our observations.    In any event, if reported numbers corroborate the initial takes from pundits, we believe the industry picture is not healthy.

Notable Share Gainers: Ford, FCA, Tesla, Honda, Mitsubishi, Subaru, Hyundai-Kia grew volumes on YoY bases.  Only Porsche and Rolls grew their unit sales on both sequential and YoY bases, however.

Notable Share Losers: GM, Toyota, Nissan, Mazda, VW-Audi, Mercedes and BMW on YoY bases.
We maintain our view that the biggest headwind we see in 2019 in terms of U.S. auto demand is currently wealth effect and the slowing real estate market that is likely to pose headwinds to consumer sentiment.  We maintain our expectations for a low-mid 16m unit range SAAR in FY19 and advise investors to look for clues in the coming months that may suggest that the light truck mix has peaked.  
January 2019 Sales &amp; Market Share Summary 

January '19 Sales &amp; Market Share Summary 
January '18 Sales &amp; Market Share Summary 


('000 Units)
Cars
Mkt shr
Trucks
Mkt shr
Total
Mkt Shr
Truck Mix
Cars
Mkt shr
Trucks
Mkt shr
Total
Mkt shr
Truck Mix


GM
34.7
9.6%
150.1
19.5%
184.8
16.3%
81.2%
36.2
9.5%
162.2
20.9%
198.4
17.2%
81.8%


Ford
31.1
8.6%
140.6
18.2%
171.8
15.2%
81.9%
31.7
8.3%
128.8
16.6%
160.4
13.9%
80.3%


FiatChrysler
10.5
2.9%
123.6
16.0%
134.2
11.8%
92.1%
11.3
3.0%
118.7
15.3%
129.9
11.3%
91.3%


Toyota
60.8
16.8%
95.2
12.4%
156.0
13.8%
61.0%
64.3
16.9%
102.7
13.3%
167.1
14.5%
61.5%


Honda
47.4
13.1%
58.7
7.6%
106.1
9.4%
55.3%
48.2
12.7%
56.3
7.3%
104.5
9.1%
53.9%


Nissan*
40.2
11.1%
60.6
7.9%
100.7
8.9%
60.1%
53.8
14.2%
69.7
9.0%
123.5
10.7%
56.4%


Hyundai
21.0
5.8%
21.0
2.7%
42.0
3.7%
50.0%
25.9
6.8%
15.3
2.0%
41.2
3.6%
37.1%


Kia
23.3
6.4%
14.0
1.8%
37.4
3.3%
37.6%
22.8
6.0%
12.9
1.7%
35.6
3.1%
36.1%


Other Asian
27.7
7.6%
47.2
6.1%
74.8
6.6%
63.0%
33.7
8.9%
44.1
5.7%
77.8
6.7%
56.7%


Other
65.2
18.0%
59.9
7.8%
125.1
11.0%
47.9%
52.2
13.7%
64.2
8.3%
116.4
10.1%
55.1%


Total
361.9
 
771.0
 
1,132.9
 
68.1%
380.0
 
774.9
 
1,154.9
 
67.1%

Source: Autodata

US Auto Demand in January: 16.7m SAAR - Blame It on the Weather...And the Government Shutdown