October auto sales are in, and during the month we saw 1,203,259 cars sold. This represents an improvement of about 110,000 units over October 2012, and a month over month improvement of 70,000 units. Thus far in 2013, we have seen auto sales 12,954,066 vehicles. Analysts anticipate the full year to come in above 15.5 million. This should happen with relative ease. In fact, we should look for sales to be above 15.6 million and approaching 15.7 million.
The most compelling thing about auto sales now is the shift in the GM deal. Until now, each and every satellite radio equipped car was counted as a subscriber in the quarter in which the car was sold. That is no longer the case. In fact, this Q4, none of the satellite radio equipped GM cars sold will be counted as subscribers. Here at SiriusBuzz Premium you will gain insight into this issue that most other investors will not realize until after the fact.
We all know that current SiriusXM guidance is that subscribers will be negative in Q4. Is that true, or will we see a modest positive instead? Here is how we will analyze this:
- GM installs satellite radio in 75% of the cars it makes and sells.
- The take rate on GM satellite radio equipped cars from last quarter will be 44%
- A traditional GM subscription will be considered 3 months of the trial and 1 month of marketing efforts.
In October, GM sold 226,402 cars. That would equate to 169,801 cars that would normally be added to the subscriber count but are not under the structure of the new GM deal.
In June of 2013 (4 months ago), GM sold 264,843 cars. That would equate to 198,632 satellite radio equipped cars. These would have ALL been counted as subscribers in Q2. Four months later, in October of 2013 we would see the decision point for the consumer. We know that 44% elect to keep the service, and 56% fall off of the subscriber roles. That would mean that in October we would see 111,234 deactivations.
The impact for October is 169,801 cars that would have been counted and no longer are and 111,234 that are deactivated and would have been anyway.
If you refer to the chart below you will see the compelling shift that the new GM deal makes. The leading category (in green) makes up 39% of auto sales. This category provides counted subscribers at the time of production. The point-of-sale category (in yellow) provides subs at the time of sale. In the past this category accounted for about 33% of the pool. With GM shifting this category is now an insignificant 12%. The trailing category, where GM now sits used to be about 31% of the pool. Now it is 48%.
In the leading and point of sale categories every single solitary satellite radio equipped car is counted as a subscriber at some point. In the trailing only those radios that are self paying are counted. A subscriber only becomes self paying after the trial period and only if they elect to keep the service.