Analysts impressed by Nov. demand

Likely from Santa: Soaring SAAR for December, big '14

Analysts impressed by Nov. demand

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If November's seasonally adjusted annualized selling rate of 16.4 million -- the best in nearly seven years -- sounded good, this month should look even better.

One analyst, Adam Jonas of Morgan Stanley, said the industry light-vehicle SAAR could hit 17 million for December, given widespread credit availability, rising inventories and the pace at which consumers flocked to dealerships for Black Friday sales.

"We think this is a recipe for December to see a Thanksgiving hangover early in the month with a furious Christmas holiday finish which could bring U.S. SAAR as high as 17 million units, depending on how juicy the deals are," Jonas wrote in a report last week. "It's a great time to buy a car."

The industry SAAR last touched 17 million in July 2006. A 17 million rate in December would result in total sales for 2013 of about 15.73 million.

Sales totaled 14.2 million through November, 8 percent higher than the first 11 months of 2012. Bob Carter, senior vice president of automotive operations for Toyota Motor Sales U.S.A., said in an interview last week that he estimates sales will finish 2013 at 15.7 million, about 100,000 units higher than the company previously anticipated.

Whether or not sales get to a 71/2-year high this month, the industry is poised to close out the year with considerable momentum, after it appeared to weaken in the early fall. Analysts say that strength should carry into 2014, when they expect a SAAR of at least 16 million to become the norm on a monthly basis.

"All the key drivers in the market are still going in full force," said Lacey Plache, chief economist for "The longer we go without having major economic dips, the more confident people have become."

Rising SAAR
After dipping in September and October, the U.S. light-vehicle SAAR hit a nearly 7-year high in November and could approach 17 million in December.
 Millions of units 
Jan.15.22 July15.8
Feb.15.32 Aug.16.07
March15.29 Sept.15.26
April15.19 Oct.15.22
May15.45 Nov.16.41

Edmunds is forecasting U.S. sales of 16.4 million next year. Kelley Blue Book projects 16.3 million.

The estimates suggest gains of about 4 percent next year. Alec Gutierrez, senior analyst for KBB, said slower growth should be seen not a worrisome sign but as an indication of how much sales already have recovered.

When automakers were selling 17 million units a year nearly a decade ago, demand was being artificially boosted -- and profits hurt -- by huge discounts and buyers' ability to finance cars with home-equity loans during the housing-market bubble.

"We are at a point where the industry has reached a level of stability," Gutierrez said. "Anywhere in the 16 to 16.5 million range, that was a very healthy year prior to the recession."

Automakers said sales at the end of November were better than expected, and December is another month when consumers are conditioned to look for good deals. But on the whole, incentives were roughly flat from a year ago and down slightly from October, according to Edmunds.

"It's not a purely incentive-driven industry," said Mark Reuss, General Motors' president of North America.

Ford's announcement last week that it is planning to cut North American production by 2 percent in the first quarter to keep inventories in check -- despite gaining more market share this year than any other automaker -- shows how much executives' thinking has changed since the downturn, Gutierrez said.

"In the past, you would have seen Ford or any other automaker in that position increasing production," he said, "but the fact that Ford is cutting back really speaks to the fact that they are taking a more disciplined approach and trying to maintain profitability rather than pushing volume just to gain market share."

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