Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

United states Automobiles / Thematic (Sector/Industry)

<p>U.S. Light Vehicle SAAR softened to 18.09m units in October, from 18.57m units in September.  Based on initial estimates from OEMs and other industry sources, retail decline was primarily responsible for the weakening SAAR, as replacement demand from the effects of the September hurricanes in Houston and Florida began to subside.  This was an anticipated trend from OEMs so there was no surprise.  The key question is whether the post-replacement demand driven SAAR spike will hold.  Macro factors continue to support a view that U.S. light vehicle demand will likely continue to soften into 2018.</p><div class="content-highlight"><p>Here are some initial observations on October U.S. demand:</p></div><ol><li><div class="content-highlight">According to Ford, replacement demand in Florida amounted to almost zero, since there was more repair demand there than complete replacement like Houston, where replacement demand continued to be seen.  However, Ford management indicated that Houston replacement demand was not as strong as originally anticipated.</div></li><li><div class="content-highlight">Inventory rose 2.1% sequentially but was down 1.2% on YoY basis, thanks largely to production cutbacks at OEMs during 3Q.  Industry incentive spending was down 4.2% sequentially but still remained 5.4% higher than in October 2016. YTD average industry incentive spending is up 8.3% YoY.</div></li><li><div class="content-highlight">Market share winners for the month on YoY basis were Japanese and European brands + Ford.  Losers were GM, FCA U.S., Tesla and Hyundai-Kia.  On a YTD basis,  Tesla+Japanese+ European brands posted share gains.  D3 and Hyundai-Kia posted share loss.</div></li></ol>

U.S. Light Vehicle SAAR softened to 18.09m units in October, from 18.57m units in September.  Based on initial estimates from OEMs and other industry sources, retail decline was primarily responsible for the weakening SAAR, as replacement demand from the effects of the September hurricanes in Houston and Florida began to subside.  This was an anticipated trend from OEMs so there was no surprise.  The key question is whether the post-replacement demand driven SAAR spike will hold.  Macro factors continue to support a view that U.S. light vehicle demand will likely continue to soften into 2018.Here are some initial observations on October U.S. demand:According to Ford, replacement demand in Florida amounted to almost zero, since there was more repair demand there than complete replacement like Houston, where replacement demand continued to be seen.  However, Ford management indicated that Houston replacement demand was not as strong as originally anticipated.Inventory rose 2.1% sequentially but was down 1.2% on YoY basis, thanks largely to production cutbacks at OEMs during 3Q.  Industry incentive spending was down 4.2% sequentially but still remained 5.4% higher than in October 2016. YTD average industry incentive spending is up 8.3% YoY.Market share winners for the month on YoY basis were Japanese and European brands + Ford.  Losers were GM, FCA U.S., Tesla and Hyundai-Kia.  On a YTD basis,  Tesla+Japanese+ European brands posted share gains.  D3 and Hyundai-Kia posted share loss.

U.S. October Auto Demand:  Storm Effects Beginning to Subside as SAAR Softens to 18.09m Units