February 03, 2008
January auto sales
Detroit continues its slow bleed.
U.S. sales of cars manufactured in North America were actually up 0.4% in January 2008 compared with January 2007.
But this was not enough to make up for the 6.0% drop in the separate light truck category, which includes the SUVs, and whose sales continue to outnumber those for cars.
Despite their woes last year, autos managed to make a positive contribution to GDP growth for 2007 (see BEA Table 1.5.2). But at the present pace, that will change for 2008:Q1. Notwithstanding, the automotive sector tends to be far more cyclical than the rest of the economy, and the weakness we see so far in the sector still is not the precipitous sudden decline that is often associated with economic recessions. Another bright spot in the January numbers is that they continue the trend that appeared at the end of last year, in that domestically manufactured light vehicles gained market share slightly relative to imports. While domestic car sales were up, imported car sales were down 5.1% relative to January 2007 and imported light trucks were down 7.1%.
My bottom line? Not as bad as some of the early fears from last month might have led us to expect. But not exactly good, either.
Posted by James Hamilton at February 3, 2008 07:58 AMdigg this | reddit
look at my chart of SAAR data at angry bear.
Posted by: spencer at February 3, 2008 10:42 AM
Not to rein in your somewhat optimistic remark
Another bright spot in the January numbers is that they continue the trend that appeared at the end of last year, in that domestically manufactured light vehicles gained market share slightly relative to imports.
but I need to understand this gain in domestic manufactured light vehicle share is not merely the result of better incentives, or a more competitive dollar (perhaps looking at other goods) but a real change in consumer preferences for better products.
But I did see that Ford lost a whack, so the idea that domestic share is increasing is a skin over a troubling body in need of attention, yes?
Likewise, (ok, and similarly) the note [Shiller] that there has been a $2T loss in the value of houses so far, in our $13T economy since the peak in 05, puts a severe damper on that carefully compiled GDP growth statistic showing ~3%,yes? Is one to believe that the GDP stat is compiled after this loss is taken into account?... as the loss is being taken into account?...retroactively accounted for much later?
Posted by: calmo at February 3, 2008 11:02 AM
I was fooling around on the Carmax website. It is shocking how cheap used late model domestic SUVs are. They have NO resale value whatsoever (Check out an '06 Ford Explorer XLT, for example.)
Detroit still makes these vehicles. How can they sell a midsize SUV for $30k new and have it be worth $17k in two years with only 20k miles?
And an Explorer is not a bad vehicle. It's actually a nice driving experience in every way but one: mileage. 13 City, 19 Highway. Youch! Ford needs to figure out how to improve those numbers significantly!
Posted by: Buzzcut at February 3, 2008 11:45 AM
"How can they sell a midsize SUV for $30k new and have it be worth $17k in two years with only 20k miles?"
Is part of it that the new cars must have interest built in, to make zero percent financing for X years work?
I see that the bank-rates page shows credit union rates starting at around 5-6% and incentives at ford.com starting at 0% (and climbing to 5%).
Posted by: odograph at February 3, 2008 02:57 PM
Buzzcut: you raise an interesting point. I was wondering if that weren't the case. I see folks in these new Suburbans and Expeditions and just wonder to myself - wow, they really must need all that metal because they are going to be virtually worthless in a few years. I really believe in buying American and always have - this foreign auto thing is totally overdone - but I am having a heck of time finding a stylish, American car that gets the gas mileage that I think I'll need over the next several years. Of course if I were to believe even half of Kunstler's "The Long Energency" I should just forget the car and move into a cave!
Posted by: Footwedge at February 3, 2008 03:11 PM
Ford Explorers are awful off-road vehicles. Even if one properly overfills the tires......
But then the fuel mileage of other solid-axle SUVs--like this household's pathfinder--and light trucks is not particularly good either. And I suppose that was the point.
It is interesting to note that a number of used SUVs from the US market are getting transported north and sold in the Canadian used-vehicle market. In addition to exchange rate shocks and pricing-to-market policies that might explain this arbitration play, the price of gasoline sold in Canada has gone up less than gasoline sold in the US. It looks like Ford SUVs lost market share to Nissan, Toyota and others, so, and I'm guessing, overall SUV/light truck sales would have declined modestly.
A couple of years ago, auto industry analysts were remarking that the NA vehicle fleet was the youngest in history. Coincidentally, current automobiles are lasting 50% to 100% longer than previous generations.
Take multiple instances of market co-ordination difficulties for consumer durables, stir in serious differences surrounding national security social contracts, and US productivity and growth could very well stagnate for several years. It will be challenging for investors to get a sense of market direction. Stagnation without inflation will stimulate punditry at some level.
I ramble. Prof. Hamilton and Mendies, This blog rocks! Can't say if you folks help me make money or avoid losing money--ultimately the true test of this science--but it is educational and fun.
Thank you. -Erik
Posted by: E. Poole at February 3, 2008 03:25 PM
On a related issue, Chrysler has just lost a major parts supplier to bankrupcty, and is seeking to remove some tooling equipment from the supplier's plant so that somebody else can pick up the slack. Two Chrysler plants are closed, with a risk of closings at many Chrysler plants very soon.
The way the GDP data work, wealth doesn't show up. Only output, or consumption, depending on how you go about it. So don't bother looking for that drop in home value in the GDP data. Fed flow of funds data will show the change, though.
Posted by: kharris at February 4, 2008 07:23 AM
1. a vehicle purchase revolves around many factors of which fuel efficiency is one aspect
2. resale value has more to do with the perceived value of a vehicle as opposed to its utility, durability, or reliability
I recently wrote to Ford and asked why they don't use their European 3.6L twin-turbo diesel engine on larger car, SUV, and pickup truck. A perfectly good, fuel-efficient, durable, high-performance engine is blocked from the American market. Of course, I haven't received an answer yet, but I suspect that the accountant have calculated that the consumer demand will be quite small given the additional cost of such an engine... even if it is significantly more fuel efficient.
People seem to want:
1. big versus small
2. fuel efficient versus guzzling
3. inexpensive versus expensive
Maybe it's just the last one getting in the way of success. Or maybe the average consumer simply cannot or will not calculate all of the cost variables in vehicle ownership when they make decisions. Or maybe some decisions are more personal and political statements than simply economic and utilitarian statements.
Posted by: Bruce Hall at February 4, 2008 07:38 AM
That European diesel doesn't come close to meeting US clean air regulations.
The additional equipment needed to make it emissions compliant (an EGR cooler, a particulate filter and possibly a urea injection system) not only add to the cost, but decrease the mileage of the diesel significantly. Include the additional cost of the diesel engine, the additional cost of the emissions controls, and the extremely high cost of diesel fuel relative to even premium fuel in the US, and the payback period for a diesel purchase is NEVER.
I was thinking more along the lines of Ford's "ecoboost" technology, which is basically turbocharging the snot out of a small engine.
Interestingly enough, those Explorers I was looking at has the 4.0 liter V6 that makes 210 hp. My Saab 9-3 has a 2.0 liter turbocharged 4 cylinder that makes... 210 hp. It makes a lot of torque too, like 230 ft-lbs at a very low 2500 rpm. It is almost the perfect SUV engine. Doing a quick back of the envelope calculation using some rules of thumb, such an engine could boost highway mileage from 19 to roughly 24 or 25. City mileage would most likely stay unchanged.
Posted by: Buzzcut at February 4, 2008 07:55 AM
Your auto chart is very frustrating. Why only 12 months? Why not show January 07 (at least) so we can visually compare the annual change?
Love your blog as a way of checking in on the pessimistic view of the economy.
Posted by: Daniel Ogden at February 4, 2008 08:53 AM
The question is why European standards and U.S. standards are not the same. Are the Europeans dying off because their standards are different.
The minuscule difference in emissions impact are creating massive marketplace inefficiencies ... and preventing the U.S. from effectively taking advantage of high-mileage alternatives to gasoline.
It seems it is the U.S. government's policy to shoot for the moon and make individuals pay for the trip.
Posted by: Bruce Hall at February 4, 2008 09:27 AM
Look again. Chart shows Jan 07 and Jan 06 and Jan 05 and Jan 04 for comparison with Jan 08. To my knowledge, this is the only free site on the world wide web on which you will see such a comparison.
Posted by: JDH at February 4, 2008 10:18 AM
You know you're being fair when some people criticizing you for being too pessimistic and others for being too optimistic.
Posted by: Steve at February 4, 2008 11:10 AM
Have you ever spent any time at street level in a European city with lots of drivers? It's a huge difference.
And there's no reason to support diesel anyways - the cost premium is similar to hybrid; and hybrid can get you similar mileage with far lower emissions. Note that every one of the studies attempting to show higher mileage for diesels I've seen has made the error of comparing a compact or subcompact diesel to the mid-sized Prius.
Posted by: M1EK at February 4, 2008 11:57 AM
Bruce, you're preaching to the choir. I agree with you.
But environmentalist might not. Those EPA regs don't come out of thin air. NOx causes smog, and diesel particulates allegedly cause lung cancer.
So there are benefits to the clean air regs, if you believe the EPAs numbers.
Posted by: Buzzcut at February 4, 2008 12:27 PM
I drive a diesel VW golf TDI in the UK, and I can get over 70 miles to the gallon (imperial). I have never seen it smoke. According to the car magazines, it goes 120mph. I have no intention of buying a petrol car again.
Posted by: RebelEconomist at February 4, 2008 12:30 PM
I selected this headline pretty much at random:
I've been seeing similar things, enough studies to believe them.
The interesting trade-off that Europe seems to have made is these kind of health risks vs greater energy efficiency and/or security.
Posted by: odograph at February 4, 2008 12:41 PM
I can get over 70 miles to the gallon (imperial).
Silly Englishman. Why don't you give us your mileage in Pharads to the Rod or something.
Imperial gallons, indeed.;)
There is a certain segment of the Amercian public that loves the TDi too. 2006 Jetta TDis generally still go for more than they cost new. It's kind of crazy.
Posted by: Buzzcut at February 4, 2008 01:35 PM
Re: Why diesel?
I have a co-worker who just put a diesel engine with 400k miles on it into another body. He got the inspiration to reuse it as he watched someone pump WVO directly out of the vat behind KFC into a tank in his truck and drive off on it. His next move is to install the SVO kit. Prii still run on dino-fuel, don't they?
I have been at street level in Madrid, Paris, and several places around Germany, Austria, and Italy. The most obnoxious vehicles were not the diesels, which were everywhere. They were the dirt bikes that streamed acrid blue smoke. At least those particulates you can see, which is not true of the most dangerous ones.
Posted by: Eric H at February 4, 2008 08:11 PM
The Golf (and for that matter the Jetta) are considerably smaller and somewhat smaller inside, respectively, compared to the Prius, and are so much dirtier in comparison that they shouldn't even be spoken of in the same breath.
Despite that, the Prius is competitive in mileage with both.
Posted by: M1EK at February 5, 2008 07:59 AM