Toyota recovers market share in US: March 2012 auto sales

by SR on April 5, 2012

Here’s my take on US auto sales for March 2012. To begin with the conclusion, this data offers more evidence that Toyota group auto parts suppliers should have a very good year in FY3/13. I think the concerns about pricing are overblown (see here) and expect substantial volume growth to drive profits significantly beyond consensus. I would pick either Denso or Aisin Seiki, but probably the former because Aisin Seiki is closely linked in investors’ minds to China and thus will be less likely to perform than Denso (see my view on FY3/13 profits) if China autos do not pick up. I’ll keep the text to a minimum and illustrate my points with a few charts.

  • SAAR of 14.4m at the lower end of ‘new normal’. In the second half of CY2011 we had continued weakness in US housing, very poor macro data from Europe, a tanking stock market and problems with supply from Japanese auto OEMs. Despite this the seasonally adjusted annualised rate (SAAR) of light vehicle sales averaged 13m units over that period. Now, I’m not suggesting that the market will go back to the 17m units level that was common 5-10 years ago (see below) but I would think a 14-15.5m unit level is sustainable out to 2015. In other words, I feel there’s upside to this 14.4m level and that if we continue to get even small and sporadic improvements in the US economy, particularly the housing market, the SAAR could top 15m. (Click on the graphic for a larger image.)

US SAAR

  • We’re up 12.9% YoY in Q1 CY2012. It’s possible to get too fixated on the SAAR, which after all is a guess at full-year data. What’s the actual performance like so far? Cumulative sales data shows that 2012 shipments so far have hit 3.5m units (the red line in the chart below) which is an increase of 12.9% YoY. That’s looking pretty good to me. Note that 2012 sales are tracking only a little below 2008 sales (the light blue line) which is reassuring given that auto sales held up well in the first 6 months of 2008 and only collapsed after Lehman Brothers, well, collapsed. Look at how robust sales were even in 2007 – that green line shows the power of easy financing. (Click on the graphic for a larger image.)

US cumulative auto sales

  • Toyota’s selling everything it can make. The chart below shows Toyota’s monthly sales in the US, which in March 2012 exceeded 200,000 units for the first time since late 2009. As you can see (click the graphic for a larger image) the Toyota recall scandal (or was that a non-scandal?), the Tohoku earthquake and the Thailand flooding have all had an impact. But the chart below the sales chart shows the days of sales that Toyota has to hand as inventory. It still has less than 50 days of stock, which is uncomfortably low. My conclusion is that as supply rises, Toyota’s sales will rise accordingly.

Toyota US sales

Toyota US inventory days

  • What’s driving sales? Pent-up demand for Toyota quality, as evidenced by the recent Consumer Reports and JD Power surveys, helped by a number of new models. One model that has been attracting very favourable reviews from specialist magazines is Toyota’s just-launched FT86 sports car (the exact name varies by region). When did you last hear a Toyota referred to as “exciting” and “fun”? The FT86 gets that all the time. Not that exciting is everything. It’s worth noting that the new Camry, which didn’t excite many investors, was by some margin the best-selling car in the US in the first quarter of CY2012, followed at a respectable distance by the Nissan Altima and then – with a significant gap – by the Honda Civic. It’s interesting to see that Hyundai Motor and Kia, which are supposedly the joint nemesis of Toyota, had no cars in the top 10 whereas Toyota had three at No.1, No.4 (Corolla & Matrix) and No.10 (Prius) respectively. The chart below (click on the graphic for a larger image) shows that Toyota’s market share is improving rapidly whereas that of Hyundai has been flat since early 2010.

US auto market shares

  • Remember Toyota’s share HAD been rising… The graphic below shows Toyota’s market share from 2006 to the end of 2009, which was the last month before the furore about recalls hit Toyota’s sales. The blue line showing the smoothed data series (I used a simple loess filter) makes that quite clear. Now, given that the Detroit 3 are more credible than they were in 2009 I would not expect Toyota’s share to go back to 2009 levels i.e. 17-18% but given Toyota’s new models, its continued strong reputation for reliability and its lack of financing constraints I expect some solid 15-16% figures over the next 12 months. What does it all mean? More business for the Toyota auto parts suppliers.

Toyota's market share

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