Inventory Could Be Limiting Factor in December U.S. Sales

November’s gangbuster sales cut inventory levels to below same-month year-ago totals, albeit slightly, for the first time in any month since November 2011, when vehicle availability was hampered by natural catastrophes in Asia that slashed production for the U.S. market.

November’s U.S. light-vehicle sales volume of 1.293 million units, which equated to a 17.1 million seasonally adjusted annual rate, left dealer inventory at 3.623 million units, just a bit below year-ago’s 3.639 million. Year-ago’s SAAR was 16.2 million.

Some production slowdowns for plant retooling and inventory control for slow-selling products aided in reducing inventory, but the main driver was last month’s boom in demand. Except for August’s 17.4 million SAAR, November’s total was the highest for any month since July 2006.

Although days’ supply from October to November typically stays flat, and often rises, this year it declined to 70 from 75. November 2013’s days’ supply was 76, on par with the prior month.

The variances are broader this year, but the sales cadence in 2014 over the year’s final five months appears to be mimicking 2013: A long-time high SAAR in August, followed by a sequential downturn – 16.3 million in both September and October this year, compared with 15.3 million in both months last year, then a November surge.

In 2013, December’s SAAR declined from November by 800,000 units to 15.4 million, a pattern likely to be repeated this year, though December should end well above the 16 million mark. In fact, actual volume for the year is forecast at 16.4 million, highest since 16.5 million in 2006.

Even though inventory is below year-ago heading into December, there is enough to support a 16 million-plus SAAR in December.

However, some key segments that usually perform well on a seasonal basis in December could be wanting, including Large Pickups, Large and Large Luxury SUVs and Lower Luxury cars.

Large Pickup inventory is 4% above year-ago, but down from a 14% year-over-year increase on Oct. 31, due in part to a 14.5% November sales rise for the segment. In addition, Ford just now is ramping up one plant building its all-new F-150 after a lengthy tooling shutdown, while on the verge of closing the second plant building the vehicle also to retool. Large Pickup inventory is likely to drain faster during December than normal, putting a crimp on deliveries at the end of the month, when daily volume reaches its peak.

Inventory of Large and Large Luxury SUVs is running lean because segment leader General Motors is having trouble keeping up with demand for its new versions. The automaker has been tallying year-over-year sales gains with the vehicles, but with December being a holiday-shortened month for available production, and inventory of its SUVs down 29% from year-ago, it will be more of a challenge to keep the increases going.

Sales have been weakening for the Lower Luxury car segment in recent months and are down 6.5% year-to-date even after a 2.5% gain in November, thanks to only a few offerings in the segment, chiefly the redesigned Mercedes C-Class. However, the segment’s Nov. 30 inventory declined 6.1% from year-ago, and it will take more strong results from a few models to eke out another gain.

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