Japanese - and Korean - Inventories Drop Most
By Michelle Krebs June 30, 2011
It’s no surprise that U.S. vehicle inventory has been hard hit by the March 11 earthquake and tsunami in Japan, but the makes and models that have seen the biggest nosedives in inventory are a bit unexpected. While their supplies are greatly depleted, the Japanese automakers, as a group, did not experience the absolute steepest decline in inventory; it was the South Koreans, led by Kia.
In analysis of a hefty sample of more than 60 percent of the nation’s vehicle inventory, Edmunds.com found that most results were as expected – Honda and Toyota suffered most from a lack of vehicle inventory due to the quake; ditto for subcompact and compact vehicles. What is surprising is that South Korean automaker Hyundai has been so hard hit by inventory depletion as a result of strong demand, in part due to real and perceived lack of availability of Japanese favorites but also due to the fact that the automaker continues to be on a roll.
Industry Inventory Bottoms Out
Overall, the Edmunds.com analysis paints a picture of a U.S. vehicle inventory that was socked with an inventory decline of 11.1 percent from March 31 through June 20, which includes the height of the typically strong spring selling season. “Industry inventory levels should have been increasing through the spring to accommodate for higher daily selling rates traditionally experienced in May, June and July,” said Jessica Caldwell, Edmunds.com’s director of industry analysis. “Unfortunately, the opposite has happened for most automakers with Honda and Toyota being the hardest hit.” The inventory decline appears to have slowed, sinking to its lowest level in early June.
South Korean Automakers See Biggest Drop in Inventory
Clearly trying to capitalize on the Japanese automakers’ woes, South Korean automakers – due to an aggressive sales push and continued strong customer demand – have suffered the largest drop in inventory since the quake in terms of region of origin for vehicles. South Korean inventories have fallen 35.6 percent from March 31 to June 20. The Japanese falloff was 32.8 percent.
Honda and Toyota have been hit hardest among Japanese automakers. Honda inventories fell the most of any automaker by 44.3 percent from March 31 to June 20; Toyota was next, down 40.5 percent. The fact that Nissan and the other Japanese makers didn’t suffer as much lessened the overall impact on the Japanese automakers as a group. Surprisingly, however, Kia ranked third in steepest falloff of inventory during the March 31-June 20 timeframe, with supply down 39.9 percent, followed by Hyundai, with stocks off 32.3 percent. Inventory of the popular Hyundai Sonata down 59.3 percent from end of March, an even more significant fall-off than the Honda Civic, which has 53.9 percent lower inventory.
The sales pace for Hyundai and Kia vehicles has been torrid. Hyundai set a new May record of nearly 60,000 vehicles sold for a 21 percent hike over the same record-breaking period in 2010. Kia not only had its best May but its best month ever with sales of more than 48,000 vehicles for a 53 percent boost from the year earlier. That gave Kia its highest market share in history at 4.5 percent, according to Edmunds.com’s records. While Kia may cool a tad in June from May, likely due to inventory shortages, Hyundai is on fire in June. Edmunds.com’s forecast for June car sales puts Hyundai on track for record sales and market share. Combined, Hyundai and Kia are predicted by Edmunds.com to see sales up more than 4 percent from May to June and up 34 percent from last June for a record 10.2 percent market share – 5.9 percent for Hyundai and 4.3 percent from Kia, according to Edmunds.com’s forecast.
GM, Chrysler Inventories Increase
While the vehicle inventories of Japanese, Korean and European makers dropped, the inventory of vehicles from American automakers actually have increased by 5.7 percent. And all of that increase is due to building inventories of General Motors, up 9.3 percent from March 31 to June 20, and Chrysler, up 8.8 percent in the same timeframe. In fact, GM and Chrysler were the only major automakers to have higher inventories on June 20 than they had on March 31.
Ford inventories dropped a bit during the timeframe, in part due to the fact that it was winding down production of the old Focus and ramping up assembly of the new model. Ford’s top sales analyst George Pipas told media Wednesday that inventories of the Focus, Fiesta and Explorer all have been running at under a 20 days’ supply.
GM’s rising inventories are due largely to slow sales and building stocks of full-size pickup trucks and SUVs. The automaker recently announced a temporary shutdown of a couple of its full-size truck plants, saying it was for model year changeover but clearly it was also to help winnow bloated inventories of pickups which have been running at a more than 110 day supply in an environment of slow sales. In addition, it put hefty incentives on its full-size Chevrolet Silverado and GMC Sierra pickups in June, though GM’s overall incentives spending dipped in June from May.
Small Cars Socked Most by Inventory Shortages
Also no surprise is the fact that the inventory of small cars since the Japan earthquake, which coincided with a period of high gas prices, has been the most depleted among all vehicle categories. The inventory of subcompact cars experienced the steepest decline in inventory at a 50 percent drop from March 31 to June 20, according to Edmunds.com’s analysis, followed by compact cars, down a third. Conversely, the inventory of SUVs, trucks and big cars surged.
Easing gas prices combined with the Japanese vehicle assembly returning to normal levels will result in small car inventories returning to more normal levels as well. “With gas prices decreasing for seven weeks in a row now, consumer shopping habits are beginning to change with less emphasis on subcompact, compact and midsize cars,” said Ivan Drury, Edmunds.com’s pricing and industry analyst, noting sales within that segment began increasing in February as gas prices rose. “Lower gas prices combined with the recovery from the earthquake, inventory levels of those vehicles will finally have a chance to rebuild and consumers will have more choice without compromising.”
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