Monday, November 7, 2011

October auto sales could be at an 8-month high

DETROIT — U.S. auto sales in October are expected to have hit the highest rate in at least eight months, helped by pent-up demand from consumers trading in aging vehicles and a wider selection of Honda and Toyota brand cars and trucks.


Forty-one economists polled by Reuters expect October's seasonally adjusted annualized rate to be around 13.2 million vehicles, up about 9 percent from the year earlier. In September, the sales rate was 13.1 million.


Analysts said October's likely stronger sales were also driven by the greater availability of vehicles made by Honda Motor Co. and Toyota Motor Co. , after the industry recovered from Japan's March earthquake which triggered a shortage of auto parts.


"We think there was some pent-up demand held over from Honda and Toyota die-hards who waited to buy those and in October there was growing inventory," Edmunds.com analyst Michelle Krebs said. Auto sales are an early indicator each month of U.S. consumer demand.


But Krebs added that Honda's rebound could be short-lived after severe flooding in Thailand triggered a shortage of crucial electronic parts.


The flooding will not hit October sales, but it may affect November and December U.S. auto sales, particularly at Honda, analysts said.


Honda withdrew its 2011 financial outlook and cut North American output by half from November 2 to November 10. Honda also pushed back the sales date for its 2012 CR-V crossover, the company's entry in the hot-selling compact SUV market.


"It does seem more severe than we initially thought," Jesse Toprak, Truecar.com analyst, said of the impact of the floods. "Honda has a lot riding on the CR-V and it's a potential constraint in Honda sales for the next several months."


Last week, Ford Motor Co. said it expected its production to fall by 30,000 vehicles due to supply shortages linked to the floods.


Still, overall U.S. sales over the remainder of the year will benefit from both rising used car prices and the increased need to replace aging vehicles, analysts said.


U.S. auto sales have been trending higher since June when the annualized sales rate dipped to 11.6 million vehicles. Better offerings from the likes of General Motors Co. , Chrysler Group LLC and Ford are also boosting sales.


The average vehicle on U.S. roads is almost 11 years old, two years older today than the average in 2007, and at some point those cars will break down and spur new car sales, analysts said.


Used car prices in September were also at their highest level in more than five years, according to a J.P. Morgan October 25 research note.


The fourth quarter of the year is also typically the strongest for pickup truck sales, because of purchases by businesses, Krebs said.


"Everyone's trying to extend the life (of their vehicles), but you can only extend it so far," said Mirko Mikelic, senior portfolio manager with Fifth Third Asset Management. "People are almost forced to swap in for a new vehicle."


Copyright 2011 Thomson Reuters.

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