USA: downturn has begun

There are real signs that the boom in vehicle sales and production in the US is finally coming to an end. In the face of higher interest rates and a slowing economy, demand is cooling.

For the first time in almost two years, sales of cars and light trucks in the US dipped - year-on-year- in May. US car and truck sales were around 2% down on the same month of last year (when adjusted for different numbers of reporting days). The last monthly decline was in August 1998. This could herald the beginning of the end of the boom to vehicle sales that has accompanied strong US economic growth in recent years. The monthly decline is seen as evidence that higher interest rates, coupled to higher fuel costs, are finally impacting demand. Other industries are also reporting slower activity in response to the efforts of the Federal Reserve Board to dampen consumer spending. It should be noted, however, that sales in May of last year were exceptionally high and the market is still running at a historically high level. May sales work out at an annualised rate of over 17 million vehicles - a significant slowing on previous months when the annualised trend peaked at 18 million units.

Lower sales are reported for most makes, although light trucks appeared relatively resilient. Ford performed well in May, helped by strong sales of the Focus and Sport Trac SUV. Jaguar is also a success story, driven by the S-class. Some importers managed substantial growth. Hyundai, for example, is up by almost 80% in the first five months.

Sales of cars and trucks in the US by make

GM		May 2000	May 1999	Pct. Change	Jan-May 2000	Jan-May 1999	Pct. Change
Total	veh.	449,538	458,747	-5.8	2,137,386	2,032,953	4.3
Total	cars	225,795	236,929	-8.4	1,073,011	1,081,613	-1.6
	Domestic	223,871	235,665	-8.7	1,067,169	1,076,858	-1.7
	Imported	1,924	1,264	46.4	5,842	4,755	21.9
Total	trucks	223,743	221,818	-3	1,064,375	951,340	11
	Domestic	223,307	221,469	-3	1,062,415	949,726	11
	Imported	436	349	-3	1,960	1,614	20.5
w/Saab:		453,001	462,691	-5.9	,150,941	2,047,981	4.2
.
FORD
Total	veh.	399,622	379,909	1.1	1,788,858	1,689,205	5.1
Total	cars	156,901	154,656	-2.5	697,872	648,243	6.8
Total	trucks	242,721	225,253	3.6	1,090,986	1,040,962	4
w/Volvo and Jaguar		415,413	393,833	1.4	1,861,495	1,745,225	5.8
DAIMLERCHRYSLER (Chrysler)
Total	veh.	226,348	264,732	-17.8	1,135,041	1,151,194	-2.2
Total	cars	156,901	74,548	-17.6	336,711	338,191	-1.2
Total	trucks	242,721	190,184	-17.9	798,330	813,003	-2.6
w/Mercedes:		243,151	281,395	-16.9	1,217,521	1,224,573	-1.4

TOTAL

VEH.

1,564,001

1,537,153

-2.2

7,242,049

6,699,362

7.3

TOTAL

DOM

1,353,110

1,352,075

-3.8

6,280,463

5,914,679

5.4

TOTAL

CARS

786,843

782,619

-3.3

3,625,687

3,383,661

6.3

DOMESTIC

642,498

659,912

-6.4

2,963,778

2,874,226

2.3

IMPORTED

144,345

122,707

13.1

661,909

509,435

28.9

TOTAL

TRUCKS

777,158

754,534

-1

3,616,362

3,315,701

8.2

DOMESTIC

710,612

692,163

-1.3

3,316,685

3,040,453

8.2

IMPORTED

66,546

62,371

2.6

299,677

275,248

8

BIG 3

1,075,508

1,103,388

-6.3

5,061,285

4,873,352

3

JAPAN

386,970

346,318

7.4

1,721,844

1,473,118

16

EUROPE

78,039

71,971

4.3

358,990

297,709

19.6

KOREA

23,484

15,476

45.9

99,930

55,183

79.7

Source: Bloomberg
Please note that percentage changes are based on daily selling rate. Also, trucks are classes 1-3 only - up to approx 6 tonnes Gross Vehicle Weight.

Downturn in car production has begun

Output of passenger cars in the USA fell by 8.3% in April to 453,817 from 494,630. That followed a March when output had been flat against the year ago result. Output for the first four months was still 0.7% ahead at 1,947,789 from 1,934,758, but the predicted downturn seems to be underway. The April build figure was actually the lowest result that we have on record, but we only started compiling the monthly table about 25 years ago. Even in 1982, when only 5 million cars were built in the full year, the April result was well above the 2000 figure. It could be that April 2000 was the lowest for almost 40 years. Full year 1999 had finished at 5.64 million, and we stated at the opening of the year that 2000 would likely see around 5.5 million cars built, whilst 2001 will see a further reduction to just 5.4 million. The annualised build rate as at the end of April still stood at 5.63 million, but we are sticking to our original forecast.

USA - Passenger Car Production Trends

All of the top three players recorded negative growth in April, but they were not alone. Only Chrysler, Mitsubishi and Subaru built more for the month than last year. The sector is ahead by and large because Ford has built 61,000 more cars to date than last year, but they slipped by 11,000 units in April itself.

Table 2. US passenger car production by make, Jan-April