August is usually one of the best months of the year for car dealers. Not so in August 2010. Car sales dropped a whopping 21 percent from sales a year ago. This resulted in the slowest August on record for the last 28 years. Ironically, the biggest decrease in sales was recorded by Asian automakers, the very ones who were the biggest recipients of the Cash for Clunkers program in August 2009.
Huge Sales Drop
Sales for Toyota dropped an incredible 34 percent last month compared to August 2009. It was almost as bad for perennial favorite Honda, which had a 33 percent decrease. Nissan was down 27 percent from a year ago. These car manufacturers recorded some of the biggest sales increases in 2009 when the Cash for Clunkers program provided up to $4,500 rebates for some car buyers. The three historical U.S. automakers--General Motors, Ford, and Chrysler--fared much better last month with a combined decrease in sales of just 14 percent.
Some analysts attribute the slow auto sales to a number of factors:
- A continuing slow economy, evidenced by a 27% drop in home sales in July.
- A fear by consumers that a double-dip recession looms on the immediate horizon.
- The fact that a re-structured auto manufacturing industry is not offering incentive packages that were as big in previous years.
When August 2010 sales are translated into a Seasonally Adjusted Annualized Rate (SAAR), they come out to 11.7 million vehicles. It’s helpful to put this figure into a historical perspective. The U.S. auto industry was doing well in 2006 when auto sales hit a record 16.5 million units for the year. However, things began to decline in 2007 when national sales slipped to 16.1 million vehicles. Then in 2008, things got much worse when sales fell to 13.2 million. A shocked U.S. car industry had no idea how bad things were going to get: just 10.4 million units sold in 2009.
Industry experts had been forecasting auto sales in 2010 of up to 12.5 million units. This projection anticipated a continuing economic turnaround. However, most experts now agree that figure is out of reach. The current annualized sales rate of 11.7 percent is less than hoped for, but better than the worst case scenario.
Unemployment remains high and national housing figures continue to be pessimistic. It was hoped by some economists that if auto sales strengthened, it would reflect strong consumer demand across the economic spectrum. However, the reverse seems to be taking place. Last month’s declining car sales are giving economists pause.