Despite a weak start to the month due to Superstorm Sandy, auto sales for November of 2012 are expected to top 1.1 million. This would represent a 12% increase over November of last year, and is just over the pace that was posted in October of this year. If November sales hit the expected 1.1 million the year to date tally would be at about 13.1 million. This would imply that we would need just 900,000 cars sold in December to hit 14 million, but 1.3 million to hit analyst expectations of 14.4 million for the year. Essentially, December needs to be the second best month of the year to hit expectations. That is not unrealistic, as December is usually strong.
November has seen increasing sales each week. For satellite radio the numbers are good. New car sales deliver the bulk of satellite radio subscriptions, and each month with new car sales over 1.1 million typically helps to deliver strong quarterly numbers. There will be a wrinkle from Sandy. While there are many consumers that will be forced to buy new cars, there were also many satellite radio equipped cars that were destroyed in the storm. What we will see over Q4 of this year and Q1 of next year is likely a small boost in paid and unpaid promotional subs coupled with a churn rate that will be in the neighborhood of 2.0%.
Overall sales this year are about 12.5% ahead of last year. November was helped by a few factors. Incentives are up, in particular among domestics. The domestic makers ended October all at the high end of inventory levels and are using more incentives to boost sales and bring the days to sell number back in line with what is more desirable. Another Sandy dynamic is that the price of the average used car across the nation is about $1,000 higher. These higher prices on used cars coupled with better consumer incentives help boost new car sales. That delivers yet another wrinkle to SiriusXM’s used car initiative, as slower used car sales deliver fewer unpaid promotional subscriptions. All in all we should expect small fluctuation in a few of the numbers, but nothing to get excited or worried about. This dynamic is much different than the Tsunami that impacted 2011 sales.
If not for Sandy, the 2012 numbers would likely be approaching or just over over 14.5 million. That 100,000 unit difference will be spread over about 3 or 4 months. It is estimated that the storm cost October sales about 30,000 units, leaving the balance of the impact (both positive and negative) to be spread through November, December, and January.
The most positive news on November car sales for satellite radio is that it appears that we will avoid bad headlines. As long as the growth rate stays near anticipated levels, the headlines should be overwhelmingly positive. If November sales were to post growth under 10%, the story would be different. Longer term it will be interesting to see how the industry reacts. As a whole, incentives were higher than just a couple of months ago, a situation that is great for consumers but not as bullish for the auto sector. As 2012 wraps up and we look to 2013, we will want to monitor what facilitates growth. Will it be organic or incentive driven? The preference is organic growth.