September U.S. Inventory Remains Well Balanced for Expected Q4 Demand

After culling some excess inventory with an 8-year high seasonally adjusted annual rate in August, U.S. light-vehicle sales fell back to trend in September with demand strong enough to keep inventory largely in check heading into Q4, the sales start for most ’15-model-year vehicles.

September LV inventory ended at 3.3 million units, 8.1% above like-2013 and a 3.2% increase from August. Days’ supply was 64, slightly higher than year-ago’s 62 and well above August’s 55. Ostensibly indicating there is some excess dealer stock, September’s days’ supply is noticeably above the 60 WardsAuto estimates is an optimum level this time of year.

Most of the extra inventory is in pickups, a situation expected to be alleviated through stronger sales and because Ford has built up F-Series stock to get it through a production slowdown through the end of Q1 2015 to retool for a redesigned version.

Most of the remaining surplus is in Small and Middle Cars, which WardsAuto expects to be pared though a combination of production slowdowns and sales incentives.

Conversely, there are some CUVs and import luxury makes in short supply, though not enough to make a dent in overall industry sales volume.

WardsAuto’s preliminary sales expectations for Q4 call for October and November to remain close to September’s 16.3 million-unit SAAR, then spike upward in December, with sales ending the year between 16.35 million and 16.4 million units. Sales will continue to be strong based on year-to-year comparisons for CUVs and large trucks. Reaching 16.4 million for the entire year could depend on how much incentive activity is used to reduce car inventory, although the pickup segment could get even more competitive.

CUVs, SUVs and pickups spurred demand in September. That’s not surprising, considering those three segment groups accounted for nearly half of the LV inventory on hand coming into the month. September sales of the three groups increased 12.7% from same-month 2013, comprising 49% of sales vs. like-2013’s 46%.

Inventory for CUVs, SUVs and pickups ended September at 1.65 million units, 13.9% above year-ago and equating to 50.0% of total LV inventory. Together, sales of the three groups are on course for the first time in any quarter to hit 50% of LV volume during October-December.

Meantime, demand for cars continued to weaken, and luxury vehicles are wavering after an extended period of double-digit growth.

Large pickups accounted for 13.5% of September’s LV sales, third-best penetration for the segment in the post-recession era. Despite a 14.1% upward sales spike last month, large-pickup inventory ended September at a robust 24.1% above year-ago.

In addition to extra F-Series stock, inventory of its competitors is up a combined 20% from year-ago, boding well the rest of the year for the segment – especially if Fiat Chrysler and General Motors look to cherry-pick loyal F-150 buyers.

Including small pickups, sales of the entire segment group should be enhanced by the end of Q4 as General Motors' new Chevrolet Colorado and GMC Canyon become available. Production started in September, and the first deliveries should begin this month. A good portion of initial sales are expected to be incremental to the industry, although long-term there likely will be some cannibalization of large pickups and other trucks, as well as conquest volume from the older Nissan Frontier and Toyota Tacoma small pickups.

CUVs continued long-term growth in September and, except for mixed results in the luxury segments, were sparked across-the-board by nameplates of all sizes.

Combined sales of GM’s Lambda-platform triumvirate, the Buick Enclave, Chevrolet Traverse and GMC Acadia, in abundant supply all year, pushed the Large CUV segment to its second straight year-over-year increase following seven straight declines.

Inventory of GM’s large CUVs remain well above year-ago levels, and the segment’s sales likely will continue solid gains in Q4.

Light-Truck Penetration at Highest in 6-Plus Years

Middle CUVs, the highest-volume LV segment, were helped by several models, as sales increased 15.4% in September.

In particular, demand was spearheaded by several new or recently redesigned nameplates such as the Jeep Cherokee, Hyundai Santa Fe, Mazda CX-5, Nissan Rogue, Subaru Outback,  and Toyota Highlander and RAV-4. But several models well along in their current lifecycles also pumped volume, including the Chevrolet Equinox, GMC Terrain, Honda CR-V and Nissan Murano. Following a 48% increase in August, Murano volumes were up 39% in September, which could be a selling off of old versions before a new-generation model enters the market in Q4.

The Small and Small Luxury CUV segments, two low-volume but growing sectors, posted gains of 19% and 49%, respectively. Small Luxury CUVs were spurred by two entirely new entries, the Audi Q3 and Mercedes GLA.

Overall, light trucks are increasing dominance over cars. The 12-month-rolling LV share for trucks of 52.8% through September is the highest since 52.9% in January 2008.

Sales of luxury vehicles have increased year-over-year for 37 straight months but, thanks to cars, the increases have weakened and LV penetration has declined from the same year-ago period for three straight months. The Lower, Middle and Upper Luxury Car segments each fell short of year-ago in September, while Large Luxury CUVs were the only luxury truck segment to decline from year-ago.

Toyota posted its first year-over-year decline since February. Sales of its small and midsize cars recorded shortfalls, and, against the industry trend, its big trucks tanked.

Part of its decline was a continuation of poor results of its Yaris subcompact and Scion brand. The Camry and Corolla also fell short, but remain above year-ago year-to-date levels and likely are transitioning to ‘15-model sales, meaning they should rebound in Q4.

Perhaps getting lampooned by huge gains in the large-pickup segment by GM and Fiat Chrysler, Toyota Tundra sales took a precipitous drop in September despite inventory 34% above year-ago heading into the month. Also, the Toyota Sequoia, well along in its lifecycle, could be getting pinched by GM’s big SUVs. Sequoia sales dropped 8.5% in September and are down 6.6% year-to-date.

GM’s sales soared on large CUVs, pickups, SUVs and vans. Expect that pattern to continue throughout Q4. Sept. 30 inventory of its pickups and CUVs still were well above year-ago levels. Its big SUVs, including the luxury Cadillacs, are down 30%, but there is enough on hand to continue along the lines of the 42% sales increase recorded in September.

Though its year-to-date sales remain flat with year-ago, Honda posted its second straight increase in September on the strength of Honda Accord deliveries rising 25.5% and continued gains by the CR-V. Additionally, two Acura models that were in decline recorded small gains, and the recently redesigned MDX continued increases. The Odyssey, still down year-to-date, posted a modest increase in September. Perhaps the best news was the redesigned Fit. In its first full month on sale, it outsold year-ago by 60%.

[email protected]