Thursday, October 1, 2009

Today Only! New-Car Sales Report Out! Hurry! Don't Miss It!

I wrote a brief piece a few days ago about the cash-for-clunkers program and how it would simply pull sales forward rather than stimulating any sustained demand. The first piece of evidence came out today with the release of new-car sales.

From the New York Times:

After two frenzied months during the government’s cash-for-clunkers program, new-vehicle sales in the United States fell in September back to the levels seen earlier this year, automakers said Thursday.

General Motors said it sales declined 45 percent, and Chrysler reported a 42 percent drop from September a year ago.

Sales were down 20 percent at Honda, 13 percent at Toyota and 7 percent at Nissan.

Total industry sales are expected to be 23 percent less than a year ago, according to a forecast by the Web site
Those are big declines, but they shouldn't have surprised anyone. Free money is a powerful incentive, even if you had to go further into debt for that new car.
The clunkers program also cleared out inventories at many dealerships, leading G.M., Ford, and other automakers to increase production at some plants and call back thousands of laid-off workers to their assembly lines. Without a large selection for customers to choose from, many dealerships had more difficulty making sales in September than they would have otherwise.
Right. Sales were weak because there just wasn't enough inventory on hand. Ok. Sure. They can float that excuse for a month or two as they're busy ramping production to replenish inventory to meet this supposed burgeoning unmet demand. However, I suspect they'll soon be sitting on too much inventory, offering the latest excuse for weak car sales while aggressively lobbying Congress for Revenge of Cash-for-Clunkers. Here are a few potential excuses for next month's new-car sales report:
  • Customers are eager to buy but are just dazed and confused by our huge inventory selection.
  • Consumers were too busy cashing out their 401Ks to buy food, but they'll be back soon.
  • With more people losing their homes we expect car sales to rocket any day now as folks are forced to live out of their cars.
  • We just didn't have the right mix of inventory to meet the huge demand.
  • We think we just didn't have enough balloons in the showroom to spur sales.
  • It would have been a great month if our commission-based salesmen could have made more money selling cars than collecting unemployment insurance. But just wait til their insurance runs out!
  • Coming soon! Zero down, $10,000 cash back, 1 year no-risk trial period, we'll babysit your kids every other weekend!
  • Americans were too distracted trying to find American Samoa on a map.
We are very unlikely to see a sustained and strong improvement in new car sales, absent continuous government incentive welfare programs. Consumer debt is too high, unemployment is too high and rising, and job loss fears remain elevated. More and more people are discovering that you really don't need a new car every few years.

If only the car manufacturers had stuck to their earlier strategy of manufacturing a bad product that didn't last very long...

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