The Toyota recall situation, congressional hearings, and bad press that followed actually served to boost auto sales in the first quarter of 2009. This was accomplished in part because Toyota launched a massive ad campaign in an effort to save face, complete with 0% financing, an interest rate that has not been seen in quite some time.
This week it was announced that Toyota has halted production as well as sales of the Lexus GX 460 after Consumer Reports called out safety risks with the vehicle and potential roll-over issues. Sales of the vehicle began about 4 months ago. To date, just under 6,000 units have been sold. While the numbers are not huge, it comes on the heals of what can only be termed as a fiasco at Toyota.
This could force the company to up the anti on their ad campaign, and extend 0% financing to try to at least maintain a reasonable sales pace. This means that other manufacturers will need to follow suit. Good incentives for consumers was just enough to boost sales late in Q1. Will the continuation of good incentives help boost Q2 sales?
While 0% financing may not be very helpful to the auto companies, it provides a needed boost for the satellite radio subscription numbers. As long as auto sales can maintain about 1,000,000 per month, the subscriber situation at Sirius XM can remain in a growth phase.
All of that being said, the latest news with the Lexus GX 460 has hit some news wires but not received a lot of television attention. If this news gets swept under the rug somehow, then the continuation of heavy incentives from auto makers may end sooner rather than later.
The key for satellite radio investors is seeing heavy incentives in the auto channel continue. As long as there are 0% deals out there, there will be car sales.
Position - Long Sirius XM, No Position Toyota