Car Sales Data Shows Slow Growth

People that cannot qualify for Home purchase usually go out and buy a car to feel good. So this is the last market of large purchases and is slooowing down. Has been for some time... lots of unsold cars in storage lots around the world!
wsj.com
Slumping Car Sales Are Latest Data to Rattle Bets on Growth

Investment managers are tempering their postelection optimism

By
Ben Eisen
Updated May 2, 2017 4:15 p.m. ET
A soft patch in the economy is damping expectations for a stimulus-driven, postelection boom, prompting many investors to retreat from bets on growth.
The first quarter marked the weakest U.S. growth in three years, according to the initial

http://www.zerohedge.com/news/2017-05-03/carmageddon-after-abysmal-april-sales-auto-workers-prepare-extended-summer-shutdowns


Carmageddon: After Abysmal April Sales, Auto Workers Prepare For "Extended" Summer Shutdowns


by Tyler Durden
May 3, 2017 12:46 PM
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Auto OEMs typically shut down plants once a year during the summer to retool for model changeovers and whatever general maintenance is required.  But this year summer shutdowns will be about much more than just retooling plants.  With inventory soaring on dealer lots, auto OEMs will likely have no choice but to extend their typically summer shut down schedule and it will take a 'yuge' toll on the 1,000s of auto workers that are considered "short term" employees and not eligible for unemployment benefits...the folks who pretty much single-handedly voted Trump into the White House.
As we noted yesterday (see "Auto Bloodbath: Every OEM Misses April Sales Estimates As Inventories Continue To Soar"), after an abysmal March print and growing speculation on wall street that auto sales are looking less like a "plateau" (Ford's label not ours) and more like a debt-fueled bubble on the verge of an epic collapse, auto investors were looking toward April auto sales for signs of hope.  Unfortunately, the "hope" trade failed to materialize as every single, major auto OEM missed their April sales estimates in fairly spectacular fashion. 
The total auto SAAR came in at 16.8mm for April, compared to hopes of 17.1mm, and the YoY change in unit sales was the worst since 2011.

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Meanwhile, inventory days continued to soar to multi-year highs with GM leading the pack on "channel stuffing" with over 935,000 unsold cars sitting on dealer lots.
.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/05/03/2017.05.03 - Auto Inventory.jpg][/url]
 
All of which has automotive analysts now predicting that the 'typical' summer shutdown cycle in 2017 will be anything but typical and could include 3-4 shutdowns for plants producing some of the worst performing models.  Per Bloomberg:

Quote :

“We’re not seeing the same picture as the president,” said Michelle
Krebs, a senior analyst with Cox Automotive. “We are not seeing any new plants being built in the United States or increases in production. The fact is we have passed the sales peak and we’re now seeing decreases in production.”
 
Even if that happens, weeks of production suspension seem almost certain to be on tap for the industry, said Mark Wakefield, managing director and head of the automotive practice at AlixPartners. He said automakers have aggressive plans for temporarily shuttering assemblies that make slow-selling sedans and small models.
 
“For certain plants, we’ll see three or four summer shutdowns for the tougher-selling products,” Wakefield said. Right now, automakers “are a little less worried about inventories because they know they’ll be taking the plants down more.”
 
“People are starting to see that this is not necessarily a plateau,” Wakefield said. “It’s a meaningful reduction, and they’re starting to make plans around that.”

Of course, as J.D. Power recently pointed out, growing inventories on dealer lots come despite OEM's spending $16.4 billion on incentives through April, or roughly $3,800 per car, up 13% vs. last year.

Quote :

“While industry retail sales pace remains high, it is being powered by elevated levels of incentive spending which pose a serious threat to the long-term health of the industry. The total value of incentives used to sell new vehicles has increased by $1.9 billion through the first four months of the year.”
 
Total incentive spending in the marketplace stands at $16.4 billion through April, up 13% from last year. On a per unit basis, spending for the average new vehicle through April was $3,814, up $460 from a year ago.  On trucks and SUVs, spending was $3,740, up $578, while on cars, spending was $3,938, up $308.
 
Despite record incentive levels, average days to turn continues to rise. Nearly 30% of vehicles sold in 2017 sat on dealer lots for over 90 days, up from 27% last year. “With flat retail demand and inventory at record levels, manufacturers will continue to face a difficult choice between maintaining elevated incentives or making production cuts,” Borrego said.

On the bright side, for Trump anyway, at least the auto jobs aren't going to Mexico.

Might as well add my 42 cents to the growing gloom. Over at Zero Hedge today; Sub-Prime 2.0: Is This The Needle That Will Burst the Bubble? Remember the 2008 subprime bubble that burst? The next bubble (2017-ish) may be in the auto loan industry. Charts & things I didn't copy over are at the link. I just copied the text.

DISCERN!!!!

http://www.zerohedge.com/news/2017-05-02/sub-prime-20-needle-will-burst-bubble

zerohedge wrote:

May 2, 2017 9:53 AM


By now, anyone with a working brain knows that stocks are in a massive bubble. For most valuation metrics stocks have NEVER been more overvalued than they are today.

However, up until now the question has remained, “what will be the needle that bursts this bubble?”

We now know… once again, it’s in subprime lending, not in housing, but in auto-loans.

Auto-loan generation has gone absolutely vertical since 2009, rising an incredible 56% in seven years. Even more incredibly roughly 1/3 of these loans are subprime AKA garbage.

In the simplest of terms, this is Subprime 2.0... is the literally the fuse for a $1.2 trillion debt bomb.

I’ve been watching this industry for months now, waiting for the signal that it’s ready to explode.

That signal just hit.

Auto-sales have peaked and are now rolling over. Indeed, looking at the chart this is a virtual repeat of what happened in late 2007 right before the economy fell off a cliff and the stock market crashed.

This is the signal I’ve been looking for. When auto-sales roll over, it shows the consumer is tapped out.

The fact that this is happening at a time when auto lenders are making subprime loans (meaning people aren’t buying even when the offer is ridiculous) means this industry has turned.

It’s now just a matter of months before the defaults start hitting. And given that we’re talking about well over $120 billion in garbage loans here, this could very well be the needle that bursts  the Fed-fueled $60+ trillion debt bubble.

[Charts & What-not at the link]