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 The bad weather in large parts of the country, including the East
Coast and Midwest, was a repeat of what happened in December, when
industry sales fell short of expectations.
Economists polled by Thomson Reuters expect the industry's annual
selling rate in January to finish at 15.65 million vehicles when
automakers report their results on Monday. However, the inclement
weather led Buckingham Research analyst Joseph Amaturo to predict a
rate of 15.3 million vehicles.
In January 2013, the industry's annual sales rate was 15.23 million
vehicles.
"It's the winter blues really," said Jeff Schuster, senior vice
president of forecasting at research firm LMC Automotive. "The
country has been hit by bad weather and in January we saw it at the
beginning of the month and now we're closing with weather issues."
The bad weather's impact was illustrated by the changing outlook at
LMC. The research firm initially forecast a sales increase in
January of 1.2 percent and an annual sales rate of 15.9 million
vehicles, but later cut that to a decline of almost 1 percent and an
annual rate of 15.5 million.
Most analysts who closely follow the industry expect January sales
on a percentage basis to finish close to flat compared with last
year, with some seeing a slight increase and others a small decline.
Morgan Stanley analyst Adam Jonas's uncle, an auto dealer in Ohio,
bemoaned the weather's detrimental effect. "Maybe people want to buy
cars, but they don't want to lose their fingers to frostbite for the
privilege," the uncle said, according to a recent Jonas research
note.
Monthly sales are regarded as an early indicator of the U.S.
economy's health. The industry has held up better than the broader
economy because of easier access to credit and consumers' need to
replace aging vehicles, which now average more than 11 years.
However, January plays a smaller role in how the year plays out,
analysts and industry officials said.
In 19 of the last 20 years, industry sales in January have been the
lowest of the year. Because of that, even slight movements versus
expectations can have a magnified effect on the annual sales rate,
analysts said.
Fleet sales in January are expected to fall due to the decline in
tax incentives available to commercial buyers. Barclays analyst
Brian Johnson said one automaker told him it expects sales to retail
customers to make up 90 percent of the total in January, compared
with 77 percent a year ago.
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Some analysts have voiced concern about rising incentives biting
into companies' profit margins. However, research firm TrueCar.com
estimated the industry's average incentive spending in January fell
3 percent from last year to $2,452 per vehicle, with cuts made by
Fiat's <FIA.MI> Chrysler Group and GM.
That discipline on pricing may not hold. "Incentives and fleet will
quickly become attractive levers to pull if (automakers) realize
they've overreached on their sales goals," TrueCar Executive Vice
President Larry Dominique said.
January sales are expected to fall at GM, Ford Motor Co <F.N> and
Toyota Motor Corp <7203.T>, but rise at Chrysler, Honda Motor Co
<7267.T> and Nissan Motor Co <7201.T>, according to a poll of
analysts.
Despite the expected January chill, most industry executives still
expect sales for the year to finish in the range of 16 million to
16.5 million light vehicles. Last year, industry sales rose 7.6
percent to 15.6 million vehicles, hitting a six-year high.
That optimism was reflected in comments made by David Kelleher,
whose dealership had its best sales in January since opening in 2005
despite more than 22 inches of snow through three storms in the
month. He said that shows that the industry's fundamentals remain
strong.
"Business is vibrant," said the owner of a Chrysler-Jeep-Dodge-Ram
dealer outside Philadelphia. "I have to assume there's still a lot
of pent-up demand in the market that's going to come out when the
weather is more favorable."
(Reporting by Ben Klayman in Detroit;
editing by Andrew Hay)
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