Auto Sales Down in September

The Kerrigan Auto Retail Index was down -5.98% for the month of September, under-performing the S&P 500 Index’s performance, which increased 0.43%.   

All seven component stocks were down in September. Group 1 Automotive posted the largest loss of 14.85%, followed by Sonic Automotive (-10.00%), AutoNation (-8.38%), Penske Automotive Group (-6.99%), CarMax (-4.34%), Lithia Motors (-4.00%), and Asbury Automotive Group (-3.02%).

Major automakers, with the exception of Fiat Chrysler Automobiles (FCA) and Subaru, posted lower U.S. sales in September, with unit sales down 5.5% year-over-year.  That said, comparisons in September are difficult as industry sales were also boosted by vehicle replacement demand following Hurricane Harvey in September 2017. “Year-over-year comparisons are challenging this September, as the industry saw record sales levels last year,” according to Charlie Chesbrough, Cox senior economist. Year-to-date, U.S. sales are up 0.5% through September.

Unit volume dropped 15.8% (estimate from Automotive News) at General Motors, 12.2% at Nissan North America, 11.3% at Ford Motor Co., 10.4% at Toyota Motor Sales USA, 7.0% at Honda Motor Co., and 0.6% at Hyundai-Kia. Conversely, unit sales were up 14.5% at FCA, pushing FCA to outsell Ford for the first time since 2015.  And, Subaru of America extended its remarkable streak of year-over-year monthly gains to 82 months with a 3.5% year-over-year increase.

Looking ahead, Cox Automotive is forecasting a slowing sales pace over the remaining months of 2018 as buying conditions deteriorate due to higher interest rates and elevated gasoline prices.  Steel and aluminum tariffs may also be negatively contributing to sales activity. Production costs are rising as a result of higher metal prices, and OEM margins are being negatively impacted. With less profit margin available, tighter and targeted incentive activity is required.

Amongst The Kerrigan Index™ component stocks, CarMax reported its second fiscal quarter earnings, posting a 22% rise in net income, attributing the increased profits primarily to 2017’s corporate tax cut.  CarMax said their effective tax rate decreased from 37.5% to 23.7%.  CarMax’s gross profit increased 8% in the most recent quarter, and total revenue climbed 9%.  The company also announced the opening of  three stores during the quarter in Albuquerque, NM, Oklahoma City, OK, and Macon, GA.

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