24/7 Wall St. interviewed Jesse Toprak, Executive Director of Industry Analysis at Edmunds.com.
One of the largest issues looking at November domestic vehicle sales is whether bankruptcy rumors are pushing buyers away from American cars. The answer so far is "no".
Edmunds forecasts for November show GM (GM) sales dropping 28% compared to 24% for Toyota (TM), 29% for Nissan, and 28% for the total industry. See Edmunds November forecasts here.
24/7 Wall St.: November sales look like a tiny relief compared to October. Given the unemployment rate and credit crisis, did that surprise you at all? Obviously, gas prices balanced that out some.
Toprak: I think how we look at it in a historical perspective is that we are still dealing with extremely low sales. October was the worst level we had seen in twenty years, so any slight improvement made November look better.
24/7 Wall St.: Did you think you would see a large shift in market share away from GM and Chrysler due to Chapter 11 rumors? Normally, Edmunds would put GM’s market share around 21% or so. That shift away from domestics does not appear to show up in your November forecast.
Toprak: GM is offering very attractive incentives. There has been pent-up demand. Record levels of incentives and a 40% decrease in gas prices from from its July peak were important. Record incentives on some models helped keep GM’s market share. This may have helped offset bankruptcy concerns.
24/7 Wall St.: Do you think that this reasonably good trend will continue for GM?
Toprak: If GM’s future seems to be at risk "no", but as of now it has not affected sales on the street.
24/7 Wall St.: Will Japanese brands get the benefit of customers fleeing GM if the Chapter 11 problem is not laid to rest?
Toprak: Yes, they will. Once we have a recovery in the economy (in) late 2009 or early 2010. If GM is not around the increase in sales will benefit the Japanese along with a recovering overall market.
24/7 Wall St.: Some analysts are pegging domestic vehicles sales as low as 12 million next year due to unemployment and a difficult credit environment.
Toprak: Our forecast is 12.7 million units. There is some room for errors. I doubt it will be as low as 12 million. There is some upside because of a new president and the chance that the housing market will stabilize. If people start felling a bottom, they will begin to buy again. If November sales are flat with October, then we may have seen a bottom. The housing market is the key to entire economy and auto markets. If that part of the economy begins to improve last next year, car sales will move back up again.
Douglas A. McIntyre