We made this point yesterday regarding strong September car sales: Because sales have been SO depressed, and because the country requires cars regardless of the economic situation, rising sales is almost inevitable, if only due to population growth and replacement of the existing stock.
What that means is that September’s strong car sales (which were way ahead of August on an annualized rate) are just the beginning.
Citi’s Itay Michaeli explains:
September was consistent with our latest thesis that: (a) The U.S SAAR may prove more resilient than recently reduced buy/sell side expectations (see our latest “Do They Want to Drive?” report); (b) That pickup truck mix will likely continue surprising on the upside; and (c) That overall pricing is likely to remain fairly resilient, though comps do become tougher in Q4. Still, while it might be tempting to characterise September as “resilient”, even a 13.0 million SAAR remains below recessionary levels, which partly explains why the SAAR managed to rise in the face of macro headwinds. The industry can do even better, because even 13mln points to a concerning decline in vehicle density. To that, we remain convinced that the industry can take key actions via job assurance programs that could boost demand without corrupting price. If the density bleed is mostly stemmed, we believe the industry could return to a 14mln SAAR quickly, even under sluggish macro conditions. We remain quite positive on OEM stocks.