September 2009 US Auto Sales – The Cash for Clunkers Hangover

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Tag: September 2009 auto sales, Cash for Clunkers, CARS, American Bankers Association, unemployment.

October 04, 2009

The US government’s CARS $3 billion consumer incentive program ended August 24 and has accounted for almost 700,000 vehicle sales since its inception in July.   The Congressional intent of CARS was to help stimulate sales of fuel efficient vehicles and create some momentum in the automotive industry.  Prior to the initiation of the program, the annualized monthly sales rate in the US was running on average at about 9.5 million vehicles since the start of this year.  

As the data shows, the CARS program did what it was designed to do and distorted sales in the month of July and August to a sales rate of 11.1 and 13.7 million vehicles (Graph 1).  It was expected that CARS pulled forward sales and would result in a poor September.  As the September results show, the sales pace for the month was back in line with pre-CARS levels at a 9.5 million sales rate.  Sales in September were down to 746,206 from 998,062 and 1,262,189 in July and August respectively. (See: July 2009 US Auto Sales – Can Cash for Clunkers Create Momentum?)


 Graph 1: Seasonally Adjusted Selling Rate

The successes of CARS is debatable but it certainly did not create momentum as September sales have shown and it certainly did not add a full 700,000 sales to the natural market sale pace.  Based upon an average sales rate of 9.5 million vehicles, the incremental increase in auto sales because of the cash for clunkers program was about 400,000 vehicles.

GM and Chrysler saw their sales decline 45% and 42% respectively (Table 1).  Ford out performed its domestic rival for the month as their sales only fell 5%.  However, it should be noted Ford’s sales were down 36% from September of 2007, as sales declined from 189,020 sales to 120,355.  For comparison, GM was only down 15.5% in September 2008 compared to 2007 as incentives propped up sales.  Chrysler sales were down 32.8%  last September of the previous year.

GM, Ford and Chrysler are down 53%, 40%, and 61% from 2007.  The plight of the US Big Three has also befallen the major Japanese companies in the US.  The Japanese manufacturers continue to see sales fall in line with their domestic competitors.  Toyota, Honda and Nissan’s sales dropped in September 2009 by 28%, 25% and 26%. Compared to 2007,   Toyota, Honda and Nissan’s sales 40%, 39% and 41% by 2009 and consistent with the Detroit automakers.  September’s sales results continue to show the overall weakness in the US market.

Going into September, Automotive News estimated the industry had about 30 days worth of product in inventory or 1,432,300 vehicles.  North American production was about 800,000 for September.  Manufacturers are not significantly ramping up production to support the US market but have increased production to support the current sales rate and rebuild depleted inventories.

According to an Automotive News survey published in early September, the lack of consumer credit continues to depress sales.  The results of the survey showed 76% of dealers said they are losing sales because of lack of retail financing.  Lack of competitive leasing programs and financing for sub-prime borrower was also identified as a reason for lost sales.

Furthermore, Melinda Zabritski, director of automotive credit at Experian Automotive told Automotive News:

During the first half of this year, only 18 percent of customers getting new-car financing were below prime, defined as below 680 on an 850-point scale, she says. That's down from 28 percent in 2007 and 25 percent last year.

That sent the average credit score for new-car buyers up in the first half of this year compared with 2008, according to Experian. The average credit score for a new-car buyer this year was 773, up from 754. That means that only the best-rated applicants are getting loans, Zabritski says.

At the same time, there has been an increase in deep subprime lending, at elevated interest rates, for used cars, she says. Deep subprime, the riskiest category, means credit scores under 550. Super-prime is 740-plus; prime, 680 to 739; nonprime, 620 to 679; and subprime, 550 to 619.

Earlier this week the American Bankers Association's (ABA) published its Consumer Credit Delinquency Bulletin for the second quarter 2009.  It was reported that direct auto loan delinquencies fell from 3.01% to 2.46% and indirect auto loan delinquencies fell from 3.42% to 3.26 from the previous quarter.  Bank card delinquencies rose to a record 5.01%.  Record delinquency rates occurred in home equity loans to 4.01%and in home equity lines of credit to 1.92%.  The ABA report defines a delinquency as a late payment that is 30 days or more overdue.  


As consumer credit remains tight and with unemployment now at 9.8% and underemployment at 17%, a robust recovery in auto sales is not likely.  Cash for Clunkers was a blip but it will have no lasting impact on the US auto industry as the credit markets are more responsible in lending and the economy remains depressed.  My position on the industry has not changed.  Vehicle production will increase but to sustain current market levels.  These are not "Green Shoots" but a recovery to a new normal after the credit driven bubble in auto sales popped.

This past week, the tentative agreement GM had to sell its Saturn brand to Penske Automotive Group fell through.  GM then announced it would close down the brand.  That was one of the best rational outcomes I have seen in this industry in a long time as it reduces competition.  The data still indicates a reason to remain bearish on the auto industry as the US economy will struggle to recover and capacity reduction or reallocation is a must.  


Manufacturer Sept. 2009   Sept. 2008   % Change  9 month 2009   9 month 2008   % Change
BMW Group 19205 18543 4% 179489 236660 –24%
Chrysler Group  62197 107349 –42%  715516 1183519 –40%
Daimler AG 17814 20575 –13%  147969 195626 –24%
Ford Motor  114241 120355 –5%  1234104 1608983 –23%
General Motors 155679 282806 –45%  1536903 2412666 –36%
American Honda 77229 96626 –20%  884136 1180583 –25%
Hyundai Group 53134 42148 26% 580787 565752 3%
Mazda  14234 16169 –12%  160189 215408 –26%
Mitsubishi  4712 7378 –36%  42839 80105 –47%
Nissan 55393 59565 –7%  580296 785699 –26%
Subaru  14593 14491 1% 158421 143789 10%
Toyota 126015 144260 –13%  1296422 1793304 –28%
VW 24698 24879 –1%  220292 243371 –9%
Porsche  1581 1458 8% 14310 21076 –32%
Suzuki  1861 4083 –54%  33525 74517 –55%
Other 3620 4572 - 31631 24774 -
TOTAL  746206 965257 –23%  7816829 10765832 –27%

 Table 1: US Auto Sales through September 2009


Cars Allowance Rebate System Home Page

CARS New Model Vehicles

CARS Trade-In Vehicles

Dealers say typical shopper might not get financing, Automotive News, September 2009


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