Zero-to-Sixty
MONTHLY
Production Increasing;
Now What about Demand?
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We are re-launching our Zero-to-Sixty report, a monthly compendium that
includes the latest data and analysis of sales, inventory, production, and
incentives; in addition, we are rolling our Consumer Watch, Housing Watch,
and Platform Monitor into this report. Zero-to-Sixty should be your go-to
source for a monthly look at US auto industry fundamentals.
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Much has been made over the last several weeks about the production
increase that should take place from Q2 to Q3. Indeed we expect output to
increase more than 50% sequentially at the Big 3, and about 27% for the
industry. But most of this is being driven by underbuild relative to demand in
Q2, such that inventories should be below normal by June 30.
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And in the meantime the stocks are going to have to endure another brutal
earnings season, with second quarter industry output that’s likely to be down
about 40%-45% year-to-year. That’s better than the 52% decline in the first
quarter, but Big 3 output should be down about 55% (just as bad as Q1).
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Our Platform Monitor points to brutal quarter-to-date declines in the
production of platforms that are too numerous to list here. No platforms that
we track are showing higher output in the April – May period, while more
than half of those platforms are down more than 50%. To put this into
perspective, the Honda Accord/TL platform is performing relatively well, with
production down 56% year-to-year.
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We think the most important thing for automotive investors to keep in mind is
that demand has not yet recovered. While a SAAR of 9.9 million in May was
a little better than our 9.3 – 9.6 million forecast, we’re still running below 10
million units.
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And the verdict is still out on “cash for clunkers” legislation that’s likely to
become law soon. The effect on demand is likely to be lackluster, in our
view, given the likely limited number of people driving “clunkers” who can
either afford a new vehicle or qualify for a new car loan.
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The automakers are likely to run incentive programs that match or are
otherwise tied to the scrap incentive, and these programs will likely increase
dealer traffic. But like any incentive program, the demand created will be
pull-ahead demand and, all else equal, we’re likely to see a swift payback.
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While most of the factors on our Consumer Watch Scorecard showed
month-to-month improvement in the latest data, the overall implications for
auto demand are still overwhelmingly negative. The average auto loan rate
is the only factor that registers favorably on our Scorecard.
Table of contents
May Light Vehicle Sales 3
May Sales Summary 3
2009 SAAR By the Month 4
Light Truck Mix 5
US Segment Sales 5
Cash for Clunkers 6
May Inventory Update 7
Inventory Overview 7
Inventories versus Normal, Car and Truck 7
Big 3 Inventory History 8
Car and Truck Inventories by Automaker 9
Inventory Sensitivity 9
Trouble Spots 11
Forecasting June Inventory 13
Potential Q3 Production Levels at the Big 3 14
Big 3 Market Share Histories 16
Credit Suisse Production Outlook 17
Production & Platform Monitor 18
North America QTD and Implied June Production 18
North American Platform Monitor 19
Europe Platform Monitor 21
North American and Europe Combined 23
Consumer Watch 26
Consumer Watch Scorecard 26
New Car Prices & Auto Loan Rates 26
Used Car Prices 27
Unemployment 28
University of Michigan Data, Gas Prices, & Mix 29
Consumer Debt 30
Housing Watch 31
New and Existing Home Prices 31
New and Existing Home Inventory 33
Construction Watch 34
Incentives 37
Incentive and Volume Tracking by Model 38