Look again: VW dropping but industry is rocking

Are you surprised that the Volkswagen brand squeaked out a 0.6 percent sales gain despite diesel emissions violations and stop-sale tags on a quarter of its fleet?

Don’t be. Any sales gain is an illusion. And VW’s worst retail period is just starting.

First, let’s readjust the view of September sales. And straighten the kinks out of a sales calendar that put Labor Day in August in 2014 and back in September this year.

Apples and oranges.

August generated the best monthly sales rate this decade -- but unit volume fell 0.6 percent? Hey, no brand was as bad as its August unit numbers.

And nobody is as good as their big percentage change in September, even in a month with the best monthly selling rate since 2005.

Let’s remove the wonky variable and compare August and September as a single period.

In 2014, August-September sales tallied 2,832,056. This year: 3,019,284 units.

That’s an increase of 6.6 percent for the two months, even though the industry’s raw figures are down 0.6 percent in August and up 16 percent last month.

So our rule of thumb: Add 7 points to any brand’s August sales percentage change. And subtract 9 points from September.

In the case of the VW brand, the 8.1 percent decline in August sales was closer to flat, and its 0.6 percent uptick in September was almost a double-digit decline, which is more like the clobbering that many expected.

Why not a steeper decline for a freshly disgraced brand?

For one, the first half of September, including the Labor Day weekend, happened before the scandal broke and VW halted sales of diesel units.

And VW caught a break by having brand new Golfs to sell. Analyst Tom Libby of IHS Automotive said today that September’s big brand winners all have new models, though the month played out better for Ford, Volvo and Scion.

But the biggest factor? I suspect it was heroic action by VW dealers and salespeople. When bargain-hunters drifted in, salespeople button-holed ’em and talked fast. Dealers threw money on the hood of anything still for sale. I sense a real “nobody walks” moment.

Wolfsburg owes its U.S. retail folks big-time for salvaging something out of September.

But VW headquarters can’t expect another such miracle in October. The math looks bad.

The scandal is still sinking in, the diesel stop-sell order will cover the entire month instead of a half, and VW has halted national advertising. And it can’t revive its core-message “clean diesel” campaign, which now sounds painfully hypocritical.

Worse, VW can’t boost production of gasoline-powered vehicles in time to reach dealer lots in October after thinning non-diesel stocks in September. And VW trade-in values, especially diesels, are cratering.

“How deep and how long VW resale values will be hit is the key question,” said Larry Dominique, president of ALG, which monitors used-vehicle prices and forecasts leasing residual values.

The history is mixed after recent big recalls and embarrassing disclosures, he said.

“General Motors’ ignition-switch recall didn’t affect its resale values at all,” Dominique said. “Hyundai took only a little hit after having to restate fuel economy numbers. Toyota had a big dip after its unintended acceleration problem, but it was over quickly.”

Volkswagen can influence its used-vehicle prices, he believes.

“The speed of recovery depends on how soon VW remedies the situation in its customers’ eyes,” he said.

But enough of Volkswagen. Viewing August and September as one unit yields great news for the whole industry.

Through seven months, industry volume was 4.5 percent higher. And the sales pace in August-September was 6.6 percent higher.

Tap the horn, everybody, auto industry on the throttle.

You can reach Jesse Snyder at jsnyder@crain.com -- Follow Jesse on Twitter: https://twitter.com/spartyjesse

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