Luxury brands stand to feel the biggest effect from the market slump because their customers tend to buy based on wants more than needs, and therefore can more easily postpone a purchase if the timing doesn't feel right.
August 24, 2015 - 2:45 pm ET -- UPDATED: 8/24/15 5:31 pm ET - adds details
Slumping stock markets could make it tough for dealerships to hit their August targets for U.S. new-vehicle sales, rattling consumers who might be on the fence about making a big purchase. The broad declines in U.S. equity markets on Monday also pushed shares of General Motors and Ford to 52-week lows before rebounding.
The market turbulence is badly timed for dealerships, which can close as many as 40 percent of their new-vehicle deals in the last week of a month. August results already were expected to be hindered by the fact that sales made over the long Labor Day weekend will count toward September’s tally this year.
U.S. sales over the Labor Day holiday weekend have been included in August results since 2012.
“There’s always a very strong correlation between how the stock market performs and new-vehicle sales,” said Jesse Toprak, a longtime auto industry analyst with the Toprak Consulting Group. “It’s going to make the month end a bit of a challenge. If you’re going to spend money on a purchase that you don’t absolutely have to make at the moment, it makes you pause.”
Automakers are scheduled to release U.S. sales results for August on Sept. 1.
After the Dow Jones Industrial Average dropped more than 1,000 points last week, automakers and dealers said they saw little impact on traffic over the weekend. But a 1,000-point decline after the market’s opening today -- after an early afternoon rebound, the Dow was off about 325 points by midafternoon, and was off more than 650 points in late trading -- sparked more jitters that could scare off car shoppers. The Dow closed down 588.40 points, or 3.57 percent, at 15,871.35.
“August is always a big month for us. I guess we’ll be keeping our fingers crossed on this,” said Lisa Copeland, general manager of Fiat-Alfa Romeo of Austin in Texas.
Since 2004, the Standard & Poor’s 500 Index has moved in tandem with the auto industry’s monthly seasonally adjusted, annualized selling rate 78 percent of the time, Toprak said.
He said it’s not the financial impact of the markets’ ups and downs that consumers react to as much as the psychological message the movements send about whether it’s a good time to spend money.
The S&P 500 closed at 1,893.21, down 3.94 percent to a 10-month low.
Luxury brands stand to feel the biggest effect because their customers tend to buy based on wants more than needs, and therefore can more easily postpone a purchase if the timing doesn’t feel right.
Shares of Penske Automotive Group, whose portfolio of dealerships is heavily dependent on luxury brands, fell as much as 10 percent this morning before recovering most of the day’s losses. They closed Monday at $47.49, a decline of 3.2 percent, or $1.57 a share.
Shares in AutoNation, the biggest U.S. dealership group, fell 1.85 percent, or $1.09 a share, to close at $57.80.
GM shares closed down $1.80, or 6 percent, at $27.80, in large part because of the company's exposure to the weakening China market. Ford shares closed off 4.83 percent, or 67 cents, at $13.19 on Monday.
Ford Motor Co.’s chief U.S. sales analyst, Erich Merkle, said he still expects an August SAAR in the “mid- to high 17 million” range. Ford’s forecasts include about 400,000 medium- and heavy-duty trucks.
“So far for the month of August, sales appear to be very brisk and very healthy,” Merkle said. “There’s always going to be a certain level of volatility, and you sell through those times.”
The SAAR has topped 17 million four out of seven months this year.
Analysts believe other factors -- falling gasoline prices, low interest rates, favorable financing options and a healthy job market -- will provide support for new-vehicle demand in coming months.
Gregg Ciocca, dealer principle of Ciocca dealerships in Pennsylvania, said August has been a great month, particularly for his Subaru and Audi dealerships.
"Our stores have been very busy," Ciocca said Monday. "I haven't noticed any nervousness ... We haven't felt that market pressure just yet, but I'm sure there's a chance we might."
Edmunds.com said shopping traffic on its website has been steady since the markets began tumbling. Its chief economist, Lacey Plache, said low unemployment and easy access to credit should continue to support strong demand, though consumer confidence could take a hit.
“If consumers take a deep breath and see how well other aspects of the economy are performing, it should be enough to maintain calm,” Plache said in a statement. “This might have been a necessary market correction on Wall Street, but it’s not yet a foregone conclusion that it will ripple out to other areas of the economy.”
U.S. light-vehicle deliveries have climbed 4.5 percent this year to just over 10 million through July and are on pace for the second-best year in history. This month, TrueCar raised its full-year forecast to 17.2 million. The only year better than that was 2000, when automakers sold 17.4 million vehicles.
TrueCar President John Krafcik said low interest rates and replacement demand are combining to drive sales to a 15-year high. IHS Automotive said in July that the average vehicle is now 11.5 years old and will rise to 11.7 years by 2018.
Nora Naughton contributed to this report.