VIDEO: Edmunds.com Analysts Raise Concerns on 2010 Car Sales
By Michelle Krebs June 28, 2010On Thursday, automakers will report how many vehicles they sold in June and how many they sold in the first half of 2010. Edmunds.com's senior analysts Karl Brauer, Jessica Caldwell and Michelle Krebs share their thoughts - and concerns - about the year so far.
An Anemic Recovery Juiced by Fleet Sales
Indeed, first-half 2010 sales will show improvement over the first half of 2009. Industry sales through the end of May were up 17 percent from the same period a year ago.
But that's not saying much: 2009 was dreadful, one of the worst years in about four decades.
And despite the improvement, sales so far in 2010 remain significantly weaker than the more normal -- though hardly banner -- year of 2008. Year-to-date sales are trailing the same 2008 period by about 24 percent.
June sales won't help much. They surely will be better than June 2009 figures -- by about 17 percent, according to Edmunds.com's forecast. However, May's anemia will spread to June.
Edmunds.com forecasts a nearly 10-percent decline in new-vehicle sales from May to June. June's Seasonally Adjusted Annualized Rate (SAAR) is expected to be 11.2 million vehicles, down from May's 11.6 million SAAR.
For the full year, Edmunds.com is sticking with its prediction of 11.3 million full-year sales, a forecast that's on the low end of industry forecasts.
Most concerning to Edmunds.com analysts is that 2010 first-half sales are being juiced by abnormally high fleet sales, disguising underlying weak consumer demand.
Daily rental car companies and corporations, which held onto their vehicles through last year's recession, are finally rejuvenating their aging fleets. In addition, governments pulled ahead their purchases of fleet cars, thanks to federal economic stimulus funds.
However, retail customers, who account for the bulk of car sales, are not buying in the volume many forecasters had projected.
Segments, Makers with Momentum
Still, there are bright spots.
The midsize-sedan segment is surging. Sales in the segment have soared 33 percent compared with five years ago. Edmunds.com analysts theorize consumers see midsize cars as the "safe bet" -- roomier and more practical than a small car but more economical in price, ownership and, most importantly, fuel efficiency compaed with a large car or SUV. In addition, new entries, such as the wildly successful Hyundai Sonata and the Ford Fusion, which continues to set new sales records, have fueled the midsize car segment's momentum.
And speaking of mometum, Edmunds.com analysts point out that both Ford and Hyundai, which performed well during the 2009 downturn, still have it. Ford, thanks to numerous product hits coupled with Toyota's recall struggles, has grabbed back its spot as No. 2 seller of vehicles in the U.S., behind General Motors. Toyota now ranks third.
Edmunds.com analysts note Honda, BMW and Chrysler face some challenges. Core products from Honda and BMW remain solid but niche vehicles around their edges are struggling. Both automakers have higher sales than a year ago but are underperforming the industry's overall sales increase.
Chrysler has shown improvement, particularly in pushing its breakeven point to levels not experienced since since Lee Iacocca was chairman in the 1980s, but it remains product starved. Edmunds.com analysts are eagerly watching sales reports on the new Jeep Grand Cherokee to see how much it boosts Chrysler's overall sales. The new 2011 Grand Cherokee's sales will be included in June's sales report released Thursday.
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