Steel Markets
Armada Corp Intelligence: Challenges on the Horizon for Auto Sales?
Written by John Packard
August 3, 2014
Armada Corporate Intelligence reported there may be some challenges to automotive sales looming on the horizon. The rate of disposal of older vehicles is not keeping pace with new car sales. But, that is just one of the issues the automotive companies may face. The following article came from the Friday, August 1, 2014 issue of Armada Executive Intelligence Brief:
Auto Sales Strong – But Incentives Grow
Auto sales were strong in July, full month reports will be out in about two weeks. But, what was interesting was that incentives were up 8% over the same month in 2013. Bloomberg reported an Edmunds statistic that showed that 13.5% of the new car loans issued in July was at zero percent interest. This was the highest rate of zero percent interest incentives since 2010.
We are on track at this time to sell about 17 million vehicles this year. But, there is some concern that current sales rates are being driven by consumers who want to purchase a new vehicle – not because they “need” or have to have it. There was a statistical analysis done that showed that the rate of disposal of vehicles was not outpacing or nearing the rate of consumption. That would suggest that we aren’t seeing vehicles moved to salvage as quickly as we are adding new vehicles. And the rate of new licensees is not growing as fast as in previous years. So, what analysts don’t know is whether we are seeing an overproduction of vehicles – creating too much supply vs. demand for new vehicles or whether this is very real demand. The increased use of incentives to spur sales might suggest that it is becoming more difficult for auto manufacturers to retain strong growth.
Carrying that notion through, as soon as conditions in the marketplace change, the difference between consumer’s “want” and “need” for a new vehicle will have a more drastic impact. Sales can fall off far more quickly if sentiment changes. And, if Congress eases up on mortgage requirements to try and spur the housing sector, the automotive industry will be the loser in that exchange. Sure, for the broader economy, a more robust housing market is a great sign. But, the automotive sector has been our haven of growth since the Great Recession recovery started.
SMU Note: Dr. Christopher Kuehl, Managing Director of Armada Corporate Intelligence is one of our Keynote Speakers at this year’s Steel Summit Conference in Atlanta on September 3 & 4, 2014. Details are on our website: www.SteelMarketUpdate.com.
John Packard
Read more from John PackardLatest in Steel Markets
Sheet market sources slam tariffs for prolonged demand slump
Tariffs are ultimately to blame for stagnant demand in the hot-rolled coil market, domestic market sources tell SMU.
Week in Review: Sept. 29 -Oct. 3
Let’s take a quick tour of some key stories from SMU in the week of Sept. 29 - Oct. 3.
Hot-rolled coil sources lament stagnant conditions
Participants in the hot-rolled sheet market expressed frustration with the continuing lack of demand this week.
Plate market sources critique mill hikes amid current market conditions
Following spot market plate price increase notices issued by domestic mills this past week, participants are contemplating the rationale behind the increases and whether they will stick. Some sources anticipate that current market conditions will shift in November and believe the increases may set a new "pricing floor."
ITC’s final ruling: Dumped, subsidized CORE imports are harming domestic market
The US International Trade Commission (ITC) finds that corrosion resistant steel (CORE) imports from 10 countries have caused material damage to domestic product producers, according to the ITC’s statement.