November US Auto Sales: the real data to watch at year-end

November U.S. auto sales are out tomorrow morning.  Get ready for hype of how many red 2-door V-6’s this automaker or that moved on Black Friday.  It’s not relevant.  I really don’t care whether the month tracked at 15.5 or 16.1 million SAAR.  We are closing on on the shift from a rapidly expanding market to a market where costs will automakers will have to control costs and command price.  

Here are three things to look at as the year ends.  More important than overall volume.

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  1. Inventories have crept up.  If December is a blow-out, +16 million, then this may adjust.  If it paces in mid 15’s.  Say 15.5-15.7, then I expect continued inventory build to be a worry.Capture
  2. Sub-prime lending is getting to aggressive.  If macro indicators are improving, sub-prime should not be the driver.  Let’s not regress to the norm of 2003-2009 levels.

    Used cars are growing inventory and raising eyebrows

    Used cars are growing inventory and raising eyebrows

  1. Used car prices hit four year lows.  This is not only a sick canary in the coal-mine, it’s also a ticking bomb as residual values are heading for shortfall.

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So, don’t just look at the headline SAAR.  And for God’s sake, ignore any nonsense on who sold more cars than whom this year.  The winner is in margin.  Profit margin, and that comes with discipline.  OK Detroit, now’s the time to prove yourself.

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Wards Auto is a bit on the high end of overall forecast.  But is this all that important?  Not really.

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