US Auto Sales November - Moderate Growth on the Back of Higher Incentives

SAAR reached 17.87mil units, below October’s level of 18.02mil units. While November was back in positive sales growth territory, there was little reason to cheer, since dsr-adjusted sales fell by 4.6% YoY and incentives rose by as much as 15% YoY, according to auto data provider J.D. Power.  
While 2016 could be the 7th consecutive year with rising auto sales (if December sales fall by no more than 1% YoY), most automakers now seem to expect a moderate drop in sales in 2017. Main concerns are:   

• Lower replacement demand,  
• An increase in supply of second hand cars (due to an expected surge in off-lease vehicle supply) and  
• Higher interest rates.  

The new administration’s economic stimulus program could support private consumption; however, we see a disconnect between economic growth and auto sales: In the last seven years, the auto market has gone from strength to strength, while the economy in general remained lacklustre. In our view, demand is very much driven by interest rates, and any upwards movements there are likely to negatively impact sales, even if unemployment declines and wages rise.  
In the report, the performance of the Japanese automakers is discussed. Also included is a table showing the performance of all automakers and the SAAR chart.