Ford Sees 2nd Half Sales Increases

This seems to finally becoming more of a consensus view…..

If it happens and I think it will, we are in store for a strong stock performance because Ford is prices as though it won’t

Auto Observer Reports

Ford Motor Co.’s ($F) chief sales analyst predicts June car sales will be level with or somewhat better than those in May, but after June, the sales rate will begin to rise through year-end. “There are some indications that May and June could be the slowest sales rates of the year,” George Pipas told media Wednesday. “There are positive signs in June’s results that suggest at some point in the second half, we’ll return to a sales rate of the first half or better.” 

Indeed, Ford is sticking with its forecast that 13 million to 13.5 million vehicles will be sold in the U.S. in 2011; Edmunds.com is predicting 12.9 million vehicles will be sold this year. Pipas said July should be improved but it won’t be until at least August before the U.S. industry returns to a 13 million or more SAAR due to inventory shortages of Japanese automakers caused by the March 11 earthquake. May car sales came in at a Seasonally Adjusted Annual Rate (SAAR) of 11.8 million vehicles – the lowest rate of the calendar year. Edmunds.com is predicting June car sales will inch up to an 11.9 million SAAR.

Reasons for Optimism
An expanding economy, albeit at a modest rate, combined with lower gas prices, an aging U.S. vehicle fleet and a growing population of licensed drivers are reasons for optimism, Pipas said. “The possibility of a double dip recession is not even on our radar screen,” he said. Further, the second half will see even better economic growth.

Much of the slowdown in car sales in May and June has been due to lower inventories of popular Japanese vehicles due to the March 11 earthquake in Japan as well as higher vehicle prices caused by tight inventories. Manufacturers have slashed incentives, and haggle room at dealerships is limited so vehicle transaction prices have climbed. As a result of lower inventories and higher prices, some consumers have deferred their vehicle purchases until those situations are alleviated, Pipas noted. In particular, Honda and Toyota loyalists have held off buying and the manufacturers are making it easy to do so by providing attractive incentives on vehicles on order through Oct. 31.

Pipas cited a recent study by Deutsche Bank that tracked the domestic retail SAAR, which has held relatively steady at about 5.8 million vehicles through the year so far. If that domestic rate holds steady and the sales rate for the Japanese improves with the replenishment of inventory, the industry SAAR will rise. As a result, Deutsche Bank predicts 14 million vehicle sales for 2011.

High gas prices, now receding, also have been a factor in slower sales.  “Gas prices have been a drag on consumer spending. If you’re spending your money at the gas pump, you don’t have it to spend on something else,” Pipas said. “A basis for some optimism is that gas prices are off their early May peak.”

Ford: Steady as She Goes
While he did not give a specific vehicle sales number, Pipas said Ford’s June sales will certainly improve from June of last year and possibly from this May. He said Ford’s June retail and fleet sales will be higher than a year ago. Its overall market share will be about 17 percent; its retail share will be about 15 percent. Edmunds.com predicts Ford’s sales will be up 11.1 percent from June a year ago and 1.9 percent from May for a 17.9 percent market share.
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