An Early Look at August Sales

At the midway point the topline story for sales this month looks broadly consistent with July. When you look deeper though, things get more interesting. First the overall numbers: The current pacing points to retail sales ending up around 1.04m, which equates to a SAAR of 11.7m. (Last month we saw 991,000 retail sales and a SAR of 12.0m.) If we assume the usual jump in fleet sales for August, we should end up with total sales of 1.26m and a SAAR of 14.2m. (Compared with sales of 1.15 and a SAAR of 14.1 last month.)

Now let's look at shifts in retail share. The big stories this month look to be GM, BMW and Honda. All have share gains in the double digits.

Honda's gain is simple to explain; they are still bouncing back from last year's inventory shortages. Some might credit GM's confidence program for their increase, but I suspect another reason that boosted both BMW and GM as well. What could that be?

Both had heavy campaigns running during the Olympics.

Want further evidence? Here's a look at specific consideration on Edmunds during the Games:

Clearly, BMW saw a huge lift from their Olympic efforts. For GM, the consideration gains were mainly for Cadillac. Looking at the GM sales share changes, broken down by division, the story is roughly the same:

Again, Cadillac is the big winner.

It will be interesting to see how long these share lifts can be sustained.

Over the past few months, sales have bounced around in a very narrow range. Earlier this year they were perhaps a bit above their trend line; credit the unusually warm winter and the rebound from inventory shortages last year. Loosening credit has also helped buoy sales. One thing that seems not to have played a role is incentives, which have been generally flat.

But when you take a deeper look, the truth is that consumer incentives have been flat. Manufacturers have gotten quite creative in propping up sales without resorting to broad based consumer incentives. In June, GM was helped by sales to fleet buyers that were 35% of their total. Last month, we heard about BMW's one-day demo sale to dealers. There has been a flurry of stair step incentive programs in the market, and I suspect that some manufacturers have been working deals with subprime lenders to help expand the market as well.

Two point from all this: The first point is that much of this is not reported in the monthly incentive numbers. They are hard to quantify, but their cost to the manufacturers is real. In other words, incentives have been climbing, even though this is not shown in the numbers.

Secondly, dealer inventories are on the rise. They're not rising to a level that is concerning, at least by historical levels, but the trend is clear. Add all this up and it suggests that decent vehicles sales, compared against a backdrop of mixed economic messages, aren't completely an anomaly. Whether the manufacturers can keep sales going at this pace through the end of the year (and beyond) remains to be seen.