March auto sales are in and the numbers present a mixed bag of overall news. While sales for most manufacturers were up month over month and year over year, the Seasonally Adjusted Annualized Rate (SAAR) fell from February 2011. The annualized rate, which came in at 13.1 million, is still well above the 1 million per month average that satellite radio investors like to see. However, it is now lower than the 13.38 million February brought that was pointing to stronger confidence in the automobile sector and perhaps the economy. Perhaps this is simply a bump in the road, but more likely it demonstrates the sensitivity of the consumers psyche when it comes to the economy.
In mid month, with auto sales poised to pace at a 13.6 million SAAR, an earth quake and tsunami hit Japan. The devastation and death toll was massive, and the aftermath is still being measured today. Initial reports relating to the auto sector were temporary production halts followed by interruptions in the supply chain that have begun to impact even non-Japanese brands. It is our opinion that the impacts relating to satellite radio will be a ripple effect which will be barely felt over the next six months. The unmeasurable aspect of the events is how they would, and will, play on the psyche of the buying public. Clearly there was a small impact in sales, but for SIRI investors, the impact is minimal.
With the March auto sales in, we can put a final tally on Q1 2011 in terms of auto sales data. The best news is that on average the quarter was over 1 million in sales per month. The 1 million per month number allows Sirius XM to add enough promotional subscribers to bring the gross number high enough to offset normal churn levels. Essentially the company can typically report positive operational numbers across the board when new car sales are above 1 million.
The interesting twist in the March auto sales numbers is that Ford carried the day while GM seemed to falter a bit. This dynamic caused a distinct shift in the balance of the "Leading", "Point-of-Sale", and "Trailing" categories. The "Leading" category bumped up to over 37% while the "Point-of-Sale" dipped below 30%. This translates to more subscribers being counted at production while less came from actual sales during March.
What we like to see is a balance between these three categories. The shift in March was likely temporary, but does warrant watching, as it carries direct impact on gross subscriber numbers reported in any given quarter. Ford made a huge jump while GM seems to have leveled off. If that sales trend continues, and the balance shift remains at these levels, production will begin to carry more importance over sales for SIRI investors.
The first quarter of auto sales was positive news, but the jury is still out on what the economy is doing. It will now take April data to see if the economy (as it relates to auto sales) is tracking better or not.
Position - Long Sirius XM Radio