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August U.S. Auto Sales Down Slightly From July, Down Sharply From August 2009; SAAR In Line With Our Expectations For 2010

Publication date: 02-Sep-2010 14:24:26 EDT

Sales of light vehicles in the U.S. in August fell 5% sequentially from July 2010, but fell 21.1% year over year from August 2009. We believe the year-over-year decline, the first in ten months, was caused mostly by the comparison with the government-funded "cash for clunkers" program that boosted sales in August 2009.

The August seasonally adjusted annualized rate (SAAR) of sales, at 11.44 million units (according to Ward's AutoInfoBank) was essentially flat with the 11.53 million units in July 2010. The August 2010 SAAR was consistent with Standard & Poor's Ratings Services' economists' full-year expectations of 11.4 million units.

The SAAR for the first eight months of 2010 was below our expectation for the full year, at about 11.21 million units (see chart 1). The SAARs for March, May, and July 2010 were above the annualized level we are forecasting for all of 2010.

Chart 1

We believe consumers are still wary about buying new vehicles until the economy is on more solid footing. We are monitoring the sequential trends in SAAR for this year more than the year-over-year comparisons with the weak and volatile conditions of 2009. For example, we knew sales comparison for August would be poor because in August 2009, the U.S. SAAR increased to above 14 million units because of the government-funded incentive program (see table 1). We believe inventories generally remain at or below historical levels, which should allow dealers to keep incentives in check for now; discipline in this area is an important factor in the domestic automakers' recovery.

Table 1

Top 10 New Vehicles Purchased Under The 2009 "Cash For Clunkers" Program
Vehicle August 2010 yoy % change in sales
1. Toyota Corolla (52.9)
2. Honda Civic (47.3)
3. Toyota Camry (43.4)
4. Ford Focus (39.5)
5. Hyundai Elantra (30.0)
6. Nissan Versa (59.9)
7. Toyota Prius (37.5)
8. Honda Accord (43.3)
9. Honda Fit (53.2)
10. Ford Escape (29.1)
Source: Ward?s AutoInfoBank, U.S Department of Transportation. Yoy--Year over year.

We expect U.S. light-vehicle sales of about 11.4 million units this year, 9.6% higher than 2009 levels, and our economists forecast a further improvement to 13.3 million units in 2011. We have lowered the 2010 forecast slightly this year because prospects for a more robust economic recovery have waned. Even the 2011 sales forecast is only about equivalent to our estimate of replacement-level sales.

In August 2010, sales of light trucks were down 7.5% from August 2009 (less of a decline than in the overall vehicle market), reflecting, in our view, the lack of "clunker" program sales last year and the onset of some replacement demand in this segment. (Sales of light trucks were down 12.7% in August 2009 from the previous year.)

The car segment faced a more difficult sales comparison in August than the larger-vehicle categories because the government program last year boosted car sales by encouraging consumers to trade in large vehicles for more fuel-efficient models. Sales of passenger cars were down 31.4% in August (they were up 14.3% in August 2009 from the previous year).

Year-over-year sales declined for nearly all automakers, with the exception of Daimler AG (up 7.4%) and Chrysler LLC (up 6.9%). Toyota Motor Corp.'s sales declined 34.1%, the largest decline of any automaker, while sales for Volkswagen AG and BMW AG declined 2.6% and 1.6%, respectively. Apart from Chrysler, Daimler, VW, and BMW, only Ford Motor Co., Hyundai Motor Co., and Kia Motors Corp. reported sales that did not decline year-over-year as much as those of the overall industry. Ford's decline (11.3%) was much less than the overall market's (down 21.1%).

The August market share (including retail and fleet sales) of the Michigan-based automakers as a group rose, to 44.2%% from 40.7% a year ago (see table 2 and chart 2). Ford reported a market share increase to 15.6% from 13.9% largely because of an increase in car market share, to 11.5% from 9.2%.

Table 2

U.S. Auto Unit Sales And Market Share Comparison
August 2009 to August 2010
--August 2009-- --August 2010-- --First eight months of 2009-- --First eight months of 2010--
Units Share (%) Units Share (%) % change Units Share (%) Units Share (%) % change
General Motors Co. 245,091 19.5 185,113 18.6 (24.5) 1,375,139 19.5 1,461,841 19.1 6.3

Toyota Motor Corp.

225,088 17.9 148,388 14.9 (34.1) 1,170,409 16.6 1,164,154 15.2 (0.5)

Ford Motor Co.

174,840 13.9 155,053 15.6 (11.3) 1,064,812 15.1 1,261,098 16.5 18.4

Chrysler Corp.

92,619 7.4 98,991 10.0 6.9 650,496 9.2 717,081 9.4 10.2

Honda Motor Co. Ltd.

161,439 12.8 108,729 10.9 (32.7) 806,907 11.4 815,075 10.7 1.0

Nissan Motor Co. Ltd.

105,312 8.4 76,827 7.7 (27.0) 524,903 7.4 599,496 7.8 14.2

Hyundai Motor Co.

100,665 8.0 86,068 8.7 (14.5) 527,653 7.5 601,445 7.9 14.0
Others 154,942 12.3 135,416 13.6 (12.6) 930,931 13.2 1,022,350 13.4 9.8
Grand total 1,259,996 100.0 994,585 100.0 (21.1) 7,051,250 100.0 7,642,540 100.0 8.4
Source: Ward's AutoInfoBank.

Chart 2

As a group, the Japanese automakers' U.S. market share fell to 33.6% from 39.0% a year ago; no Japanese automaker reported a market share improvement in August. Nissan Motor Co. Ltd. posted a 27.0% monthly decline in U.S. sales as its market share fell to 7.7% from 8.4% in August 2009. Honda Motor Co. Ltd.'s share declined to 10.9% from 12.8% because of a sharp drop in sales in its passenger-car segment. Toyota's market share dropped to 14.9% from 17.9% largely because of a 44.4% decline in its passenger-car sales. We believe Toyota's focus on addressing concerns about earlier recalls will have some success, but Ford's recent market share gains and the steady share gains from the Korean automakers may mean Toyota's market share growth may not be as consistent as it once was.

Korean automakers Hyundai's and Kia's combined share improved to 8.7% from 8.0% as their car and light-truck sales decline of 14.5% outperformed the overall industry last month.

Passenger cars made up 49.3% of all U.S. light-vehicle sales, compared with 56.8% in August 2009 (see chart 3). The market share for small cars--which benefited the most during the "cash for clunkers" program last year--dropped to 17.8% from 26.4% last year, and the share of midsize cars dropped to 21.0% from 22.7%.

Chart 3

Meanwhile, the market share for crossover utility vehicles, which are counted in the light-truck segment, continued to grow (24.8% in August from 22.5% a year ago). Fairly stable fuel prices led to improved demand for such vehicles, but we still expect the car/light-truck product mix to remain subject to gas prices--after 2008's steady rise, 2009's sudden decline, and 2010's more gradual ups and downs.

Competition in the important and still-profitable full-size pickup truck segment continued. August sales of GM's Silverado were up 5.1% from 2009, while Ford F-Series sales were up 2.1%; the F-Series remained the top-selling light vehicles in the U.S. (see table 3). Full-size pickup sales overall were up 3.8% from last August's levels and up 16.2% year to date. Toyota posted meaningful sales declines for its full-size pickups in August (down 8.4%). Ford's market share fell in its full-size pickups, to 37.6% compared with 38.2% a year ago, as Chrysler and GM gained market share. Unrated General Motors Co., with its 38.7% share for the first eight months, is just narrowly ahead of Ford, which has a 38.0% share.

Table 3

U.S. Top-Selling Light Vehicles
Ranking --August 2010-- --First eight months 2010--
Vehicle Units YoY % change Vehicle Units YoY % change
1 F-Series 45,378 2.1 F-Series 323,182 30.0
2 Silverado 34,084 5.1 Silverado 235,530 12.2
3 Camry 30,764 (43.4) Camry 220,061 (7.8)
4 Civic 22,803 (47.3) Accord 193,207 (3.7)
5 Accord 22,506 (43.3) Corolla 188,126 (3.2)
6 Sonata 21,399 81.1 Civic 179,635 (6.3)
7 Corolla 20,280 (52.9) Altima 148,881 4.5
8 CR-V 19,451 (35.8) Malibu 146,957 35.4
9 Altima 18,491 (31.1) Fusion 145,663 17.7
10 RAM Pickup 18,375 8.7 Escape 128,507 9.3
YoY--Year over year. Source: Ward's Automotive Group, a division of Penton Media Inc.

We still believe a slow and tentative economic recovery is under way, and that this year will be a better year for auto sales. However, we also believe a more robust and sustained improvement in sales remains elusive, given the uncertain economy. The U.S. consumer's willingness to buy is as critical as their ability to buy, so we continue to view the sales recovery as fragile.

Related Criteria And Research

Nishit K. Madlani, of Standard & Poor's CRISIL unit in Mumbai, was a significant contributor to this article.

Primary Credit Analyst:Robert Schulz, CFA, New York (1) 212-438-7808;

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