Well, the final numbers for November 2011 U.S. auto sales are now in the books and the totals come in at 993,775, a number that is slightly disappointing for Sirius XM investors considering that the company needs 442,000 subscribers to meet their 2011 guidance. I have long stated that auto sales of 1,000,000 per month allows the company to announce decent numbers across the board each quarter. While that mantra still holds true, the magic number is now approaching 1,100,000 per month.
Some interesting dynamics of November auto sales were that we are seeing a continued even pace in sales by the “LEADING” category (green in the spreadsheet), while the “POINT-OF-SALE” category (yellow in the spreadsheet) is losing share to the “TRAILING” category (blue in the spreadsheet).
The Leading category provides subscribers at the time of manufacture. Thus it is production and not sales that deliver subscribers in this category. Ford and Chrysler are the biggest members of this category. In November both saw their sales drop slightly. In Q3 Ford produced 656,000 vehicles. In Q4 they are anticipating production of a slightly higher 674,000 vehicles. Chrysler, while growing from last year is still well behind their performance of a few years ago prior to nearly going bankrupt.
The Point of Sale category is where some concern occurs. That category is nearly 2 points lower in Q4 so far than the average for the year. It is losing ground to the Trailing category. For Q4 Point of Sale is important because this category delivers subscribers when a vehicle is sold. If fewer cars are being sold from this category, fewer satellite radio subscribers are derived from it.
The Trailing category is the biggest mover of the auto sector. This bodes well for 2012, but does nothing to help Q4. The trailing category delivers subscribers to the company after the promotional period ends. Thus, a Sirius XM equipped Toyota, Nissan, Hyundai, or Kia sold in November does not have a chance of becoming counted as a subscriber until at least February.
Combine a flat leading category with modest production increases with a weaker Point of sale category and a stronger Trailing category and you can begin to see why it is auto sales that matter in Q4 more than anything else. In particular it is auto sales in the Point of Sale category that matter for Sirius XM.
Simply stated, Sirius XM investors need to hope for a strong December to help the company meet the 2011 guidance of 1.6 million NET subscriber additions.