The Strategist

Analysts: US car inventory statistics is alarming

05/04/2017 - 15:04

Situation with the car market of the USA looks alarming. Sales have been falling for the fourth month in a row, while number of cars in warehouses increased to the level of the 2009 crisis.

Laitr Keiows
Laitr Keiows
First of all, let's go back to the sales statistics. For all major brands, the data turned out to be worse than forecasts and showed a decline. The drop in sales has been observed for four months in a row, a situation unprecedented since 2009.

Number of days when vehicles standing idle in warehouses is also increasing. In other words, manufacturers do not send cars to dealers any longer, as sales to end-users have been greatly inhibited.

One of the main reasons for weak sales is the fact that American consumers are drowning in debt. When the debt load is already at its limit, there are problems with respect to the payment schedule for these debts. So for many American families are not even thinking about buying a new car.

To obtain the most complete information, it’s better to take a look at statistics of GM, the only manufacturer that discloses information about cars currently in warehouses. In April, the indicator increased to 100 days, at the end of March it was 98, and a year ago it was just 71 days. Experts note that 60-70 days is normal, but 100 is not.

In order to divert attention from this alarming statistics, GM’s management in its press release stated that increase in the number and time of cars’ stay in warehouses is explained by the expectations of strong sales, that is, management has consciously gone to increase production so that it can then be delivered to all willing customers. Obviously, this is not quite true.

A journalist of Automotive News, Nick Buckley, recently noted that there are 936 thousand cars accumulated in US warehouses. This number of cars, dusting in warehouses or dealer stands, has not been seen for 9.5 years, that is, since November 2007.

Will these statistics be a harbinger of a new recession in the States? Perhaps the Fed is still prevaricating when it says that the economy continues to recover confidently. In fact, however, there is a serious deterioration in the macroeconomic situation, including a minimal GDP growth in the first quarter of this year - just 0.7%.