US auto sales - who needs holidays?

The August LV selling rate (SAAR) came in at 17.72MM (+1.6% YOY) vs consensus of 17.3MM and well above the 6-mth run rate of 16.99MM. Abs sales were only down 60 bps y/y, a strong performance considering the August 2014 sales figures INCLUDED Labor Day sales. YTD SAAR is ~17.03MM, slightly above 16.9MM forecast, with Sept  likely to be strong given Labor Day promotions. Retail continues to be the driving force, with comments from Ford pointing to an Aug retail sales rate of ~15.0 mln, flat vs July but well above the YTD run-rate of 13.8 mln.

Pickups were front-and-center this month, with industry pickup mix coming in at 12.6% this month, above the year-ago level of 12.0% and the typical August mix of ~12.5%. From a mkt. share perspective, Ford (including Superduty) came in at 33.7%, up 20 bps sequentially and vs the 2Q run-rate of 32.4% (F noted it gained 100 bps of retail share vs July). The m/m uptick came despite virtually flat absolute dealer stocks of F-150s, which ended August at 90k, or ~55 days'-supply (still well below the 85-90 days' we would consider normal). About 80% of F-Series sales were to retail customers (retail pickup sales up ~20% S/D adj. in August), though Ford expects that to normalize over the coming months as new production capacity is used to meet existing fleet orders (traditionally, about 60% of F-Series sales are retail).

GM's pickup share was 38.5%, down 130bps vs its 2Q avg. but still well-above 34%-37% prior to F150 transition. Total large truck sales were up ~8% (selling-day adj.), translating to a K2XX SAAR of 1.26 mln, slightly above the YTD range of 1.25 mln.

"We think the Street sees meaningful production downside to GM's large truck program in 2016 as F regains pickup truck share. However, we note that K2XX production is running at 1.22 mln as of July, with inventories likely below the normal level of 85-90 days' (~75 days'-supply on a trailing 3M DSR at Julyend for pickups and SUVs, with GM's overall inventories down 10k in August). On our math, every 100 bps of GM large truck share is about 30k units. So bottom-line, we think GM can sustain at least a 200 bps mkt share hit without needing to reduce production in 2016", says Credit Suisse.

While overall incentive levels were healthy for the industry, but some deterioration were noted in Pickups. GM incentive as % of ATP for Large PU was at 11.6%, up 110bps vs 2015YTD, and Ford at 10.7%, up 220 bps vs 2015YTD. Besides a couple isolated months last Fall, this is the highest level we've seen since GM launched its new truck in 2013. Ford noted it expects industry pickup incentives to remain fairly stable at these levels (ie +/- $100-$200/unit) especially as its avg. spending of $4,700 is now in line with the industry. And while ATPs remain healthy at $39,500 for F and $38,000 for GM (up 5.2% y/y and 3.3%, respectively) and capacity / inventory remains tight for Pickups, it appears that market share in this segment will not come without a fight.

Looking at JD Power PIN data through Aug 21, incentives as % of ATP for the industry were up 60 bps YOY (at 10.5%), with Ford / GM up 80 / 120bps (at 13.0% / 11.4% vs their 6mth trailing avg. of 11.6% / 10.4%) and Chrysler down 40bps (at 11.6% vs trailing 6mth avg. of 10.7%). This translates to a YOY increase of $220/unit for Ford and $370 for GM, and a decline of $130 for Chrysler. J3 incentives were up 50bps and Hyundai / Kia was up 360 bps. As per the trend, final JD Power data will likely show deterioration of 30-50bps by month-end.

"GM market share of 17.2% was down 90bps sequentially and 50bps vs 2015YTD. Ford market share of 14.6% was up 20bps sequentially but down 20bps vs. 2015YTD. Chrysler was down 20bps vs 2015YTD. Meanwhile, Honda / Hyundai were up 80 / 20 bps vs 2015YTD, and Nissan / Toyota down 20bps",notes Credit Suisse.