Analysts Warn December Auto Sales Gains May Be Unsustainable and Misleading

Although most analysts predict continued growth in U.S. light vehicle sales for December, many also say that the increases are directly linked to consumers who have delayed purchasing a new vehicle, and are therefore not a reliable indicator of growth in the economy as a whole.

Annualized U.S. auto sales for December are expected to surpass 13 million units for the fourth consecutive month. But both LMC Automotive and J.D. Power say the encouraging numbers are at odds with consumer sentiment about the U.S. economy.

U.S. auto sales for December will likely reach 13.6 million units on an annualized basis, or about nine percent higher than the 12.5 million units sold in December of 2010. A number of major automakers will report their December new car sales figures on January 4, and those numbers are widely seen as a reliable indicator of consumer spending habits. vice chairman Jeremy Anwyl has expressed concern over the December sales figures in part due to the fact that Japan’s Big Three automakers (Toyota, Honda and Nissan) have recovered from inventory shortages brought about by the Japan earthquake and tsunami.

Anwyl said, “When you consider that sales performance late this year was boosted by a tailwind of buyers who deferred their purchases this summer, it suggests we may have some sales speed bumps to deal with next year.”

Jefferies & Co analyst Peter Nesvold also fears that flooding in Thailand may have an impact on U.S. auto inventories. According to Nesvold, the flooding could potentially result in “a replay of this summer’s inventory constraints” in the months to come, although he said the shortages will likely be on a much smaller scale than those caused by the March 11 Japan earthquake.

Some analysts have predicted that full-year U.S. auto sales for 2011 will reach as high as 12.8 million units.  Although that number would represent a 10.3 percent increase compared with the 11.6 million autos sold in 2010, it still pales in comparison to the nearly 17 million in annual vehicle sales that was the norm from 1997 – 2007.

Although the U.S. trails China in annual auto sales, the per-vehicle profit margin is much higher in North America. Sales of light pickup trucks and sports utility vehicles are higher in the U.S. and those vehicles traditionally have a higher profit margin than small and mid-sized passenger cars.

A panel of forecasters surveyed by Thomson Reuters predicts that light truck sales in the U.S. will account for as much as 57 percent of December’s total auto sales.

Nesvold said that dealer incentives, which reduce the per-vehicle profit margin, fell during December.

According to predicts that General Motors Company will increase its share of the U.S. market by 5 percent compared with last year. Ford Motor Company is expected to control 17 percent of the market, followed by Toyota Motor Company with a 14 percent share.

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