U.S. Car Sales in August Mean Nothing

Many economists said U.S. car sales were strong in August and that the improvement was a sign of a better trend in consumer spending. That was hardly true. Sales rose 7.5% to 1,072,283. But this August had 26 selling days, compared to 25 in the same month last year. The increase in the sales of cars made by U.S. companies in August may be at particular risk in coming months.

The most telling thing about the August numbers is that total sales for the month were only slightly higher than the losses of the sales of Toyota (NYSE: TM) and Honda (NYSE: HMC). Their drops were due to slow factory production in Japan because of the March earthquake. The unit sales of the two companies combined fell 46,000. Total car and light truck sales for all car companies in August were only up 75,000. Whatever market share gains companies like Chrysler and General Motors (NYSE: GM) can claim are likely to be fleeting as Japan’s production comes back online.

Another trend in August may say something about real demand versus that driven by lower prices or incentives. The sales of the “hottest” brands in the market were up very little. This may be a sign that consumers will disappear with an economic dip or when 2012 models are introduced — they are likely to carry very little discount at first. Sales of BMWs rose only 6.5%. Mercedes sales were up only 3.3%. Sales of the units by the fastest growing company in the domestic market — Hyundai — moved up only 9.1%.

Incentives probably will fall sharply in the next several months as dealers clear 2011 models from lots to make room for newer cars. Toyota and Honda will have more inventory as the year progresses. Those two factors will show whether the gains made by domestic car companies over the past few months will hold.

Douglas A. McIntyre