Auto Sales Rebound in October

Auto sales unexpectedly surged in October as sales grew to 10.45 million from 9.20 million vehicles in September. It was the first time since December 2008 that auto sales increased above the 10 million mark without help from government stimulus.

Domestic vehicles sales jumped 1.14 million vehicles to 7.94 million vehicles in October as domestic car sales climbed to 3.70 million from 3.30 million and domestic light truck sales increased from 3.5 million to 4.64 million.  October saw the highest amount of total domestic vehicle sales, excluding July and August, since September 2008. 

Auto manufacturers have been pointing to a rebound in October for the past few months, but most analysts dismissed these thoughts a pure marketing hype. It was originally thought that Cash for Clunkers lured many of the potential buyers into dealers and the stimulus incentives took away sales that would have normally occurred between September and the end of the year.

The economic fundamentals (i.e., high unemployment and lower income flows) should have acted a deterrent to increased sales, but consumers seem to believe the economy is getting better and have discounted potential future economic troubles.

The increase in auto sales bodes well for other consumer durables as the reasons why consumers purchase a new car, strangely enough, often translate into why consumers purchase appliances and other expensive goods.

The growth in sales was not universal by manufacturer and the data tends to be skewed due to very poor comparables from October 2008. General Motors was the big winner as sales increased 5% year-over-year, the first increase in year-over-year sales since January 2008. Ford also saw big returns as sales increased 3% year-over-year.

The biggest loser was Chrysler Group. Sales fell 30% year-over-year and are down 39% year-to-date. Consumers are worried about the direction of the company and have been holding off on purchasing new cars until they get a better understanding of who is going to be in charge.

The Japanese auto dealers had a tough month. Toyota and Honda posted no year-over-year gains. Nissan saw sales increase a healthy 6% and Mazda noticed a decline in sales by 8%.

Hyundai was the only major car manufacturer to post positive year-to-date gains in sales compared to 2008. Sales have risen 5%.

General Motors released a statement saying that the increase in motor vehicle sales may not lead to a greatly increased production schedule. As GM winds down Saturn and Pontiac, GM will not replace these sales with increased production in other brands.