Update on the auto sector

Detroit is still down, and the count begins on whether that means out.Americans bought slightly more cars manufactured in North America in February than they did in January, though in a usual year we’d expect a bigger January-to-February increase. In terms of year-over-year comparisons, January car sales were down 42% from January 2008, while February was down 44% from ’08:

dom_cars_mar_09.gif

Same story with the separate category of light trucks, which includes the once-popular SUVs. Year-over-year sales of domestically manufactured light trucks were down 40% for January and 47% for February.

dom_trucks_mar_09.gif

And it’s not just the U.S. automakers. Though not hit quite as hard as the domestics, imports are also down significantly, with sales of imported cars down 28% from February ’08 and imported light trucks down 26%. Honda, Toyota, Nissan, Mazda, and Mitsubishi have all been reported to be inquiring into assistance from the Japanese government.

imp_cars_mar_09.gif
imp_trucks_mar_09.gif

These low levels of sales are unsustainable in terms of fundamental dynamics on both the demand and supply side. On the buyers’ side, Calculated Risk noted that current sales levels would be consistent with a constant stock of vehicles only if Americans plan to hold onto their cars for a quarter century. Even if Americans don’t want more cars– and eventually we will– there is clear potential for a very significant rebound on the demand side. It’s just a matter of when.

And on the supply side, with the auto industry’s huge fixed costs, sales at these levels imply horrific cash outflows which the U.S. automakers simply have no means on their own to ride through. The U.S. Treasury may dole out emergency funds on a month-to-month basis, but eventually that game is going to be up. That seems just a matter of when, too.

So the question is, which when is going to come first?


Originally published at Econbrowser and reproduced here with the author’s permission.