December 2011 auto sales data are in on the same day Sirius XM announced the addition of about 540,000 net subscribers. The new car sales were a contributing factor to Sirius XM's success, it appears that the real hero is the used car deals that Sirius XM struck this past summer with thousands of GM and Nissan dealers nationwide.
For December the auto channel sold 1,242,000 vehicles which brought quarterly sales up to nearly 3,257,000, and annual sales to 12,768,000. These are all good numbers for Sirius XM, and ensured that the company would continue to have good numbers quarter after quarter.
There were many interesting facets to car sales in 2011. The auto channel saw substantial impact from natural disasters as well as financial disasters. The method of business shifted, as OEM's backed away from massive inventories and tried to control incentives. All in all it sets the stage for a more normalized auto sector in 2012.
In Q4 we saw what I call the trailing category continue to gain back share at the expense of the point-of-sale channel. In fact, the market share of the point-of-sale channel fell below 30% for the first time in recent memory. The "balance of power" between the leading, point-of-sale, and trailing categories has not yet fully normalized, but it is approaching that point. Perhaps by mid next year we will see better balance within the space.
For Sirius XM it appears that the story is not new cars, but rather the used car segment. CEO Mel Karmazin spoke to a "significant" contribution from the used car channel just today as a major contributing factor to their announcement of nearly 540,000 subscribers in the quarter, and nearly 1.7 million for the year.
The used car channel actually fits into the trailing category in that the promotional subscriptions are not counted as subscribers during the trial period. It is only after the promotional trial, and if the consumer becomes self-paying, that the subscriber is counted. Companies like CarMax are seeing 45% of their used car inventory equipped with satellite radio, an impressive statistic. While the new car market is filled with data, the used car channel is challenging to assess. In the two quarters since the announcement of thousands of car dealerships offering three month trial subscriptions on any satellite equipped used car, it has been a true task to assess the impact. I swung too high in Q3, and to low in Q4. My worry is that with the advent of more used car deals, it will become even more of a challenge to dial in on the exact impact of the used car market.
The good news is that I have become rather adept at digesting the new car sales and production tracking, and can now begin to assign some reasonable assumptions to the used car market, all while trying to gauge the impact of any new deals the company may announce.
Some interesting points of Q4 auto sales:
- It was the second largest quarter of 2011, only about 20,000 units off of the Q2 performance.
- The leading category sales were nearly identical to Q2, only down by 9,000 units
- The point-of-sale category was off by about 77,000 units vs. Q2
- The trailing category was 70,000 units better in Q4 than in Q2 (good news for Q1 of 2012)
- The leading category accounted 39.71% of the market in Q4, above the 38.93% average for the year
- The point-of-sale category accounted for 29.91% of the market in Q4, down from a 2011 average of 31.16%
- The trailing category accounted for 30.38% of the market in Q4, above the 29.90% for the year
- While still off balance, the categories are getting closer to normal.
With 2012 set to deliver approximately 14 million in car sales we can anticipate a good performance by Sirius XM. The wild card is the used car segment. If Sirius XM can manage to bring on six to 8 new partners in the used car side of the equation, we will definitely have an answer for how this company will grow at a great pace moving forward.