Auto Sales Up Last Month, But Why?

Auto sales rebounded sharply in September, with most major car manufacturers reporting better numbers. Sales at Ford (F) were up 8.9% last month from September 2016; +11.9% at GM; Toyota (TM) +14.9%; Nissan (NSANY) +9.5%; Honda (HMC) +6.8%. The only negatives were reported by FCA (-9.7%) and Mercedes (-1.7%).

The question is whether these numbers are sustainable beyond September and maybe the few months after. Auto sales in Texas were particularly robust as replacements are being sought for vehicles damaged during and after Hurricane Harvey. It is likely that will continue for some time and be extended to Florida in the wake of Hurricane Irma. Estimates differ, but there is surely hundreds of thousands of cars and trucks in no working condition fit for further use.

Ford’s head of sales Mark LaNeve was quick to note that sales were up in all regions, but that they had been “particularly strong” in and around Houston. GM’s chief economist Mustafa Mohatarem suggested that, “overall strength of the U.S. economy is the main force driving the market,” without clarifying that he has been saying almost exactly the same thing for over a year while auto sales slumped.

One executive for Autotrader predicted instead “this will be a short-lived party.” Another auto website, Edmunds, noted that vehicle sales were up 109% in the Houston area in the three weeks following Harvey as compared to the three weeks prior to its arrival.

I guess we will find out over the next few months. Sales had certainly been trending lower going back to December. Like everything else in the economy, there was the downturn in 2015-16 that gave way to some level of rebound in the second half of last year, an upturn that just didn’t continue into 2017.

Fleet sales accounted for another big part of the sales gains, especially for Ford and GM. This part of the auto market had been a significant drag on sales going back to last year. It adds another level of uncertainty as to whether it represents a one-time pickup for rental companies in particular to renew their fleets, or if they are back in the business of steadily buying new vehicles.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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