'Clunkers' Looks To Be Boosted For July Sales

by Karl Greenberg, Jul 27, 2009, 4:09 PM

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Even with summer clearance sales, the auto industry is hanging fire this month, with sales likely to be down perhaps 16% from the month last year. The big question mark is how the government's "Cash for Clunkers" program will affect sales.

Edmunds.com says the government program will be a boon, with U.S. auto sales likely to be up 10% versus last month, although the collective market share for the three domestic automakers is heading down a percentage point to 42.3% versus the month last year and about 3 percentage points from June.

"We are looking at stable rates compared to June, so nothing much would have changed normally; but now that we have [the Car Allowance Rebate System] -- even though it's something added in that wasn't part of national demand mechanism -- we think we will have an increase over June, and that SAAR [seasonal adjusted annual rate of sales] will be at 10 million for the first time in 2009," says Jesse Toprak, head of auto industry analysis at Edmunds. "The significance is that if this rate of sales can be maintained, the economy may be recovering gradually; it could be the beginning of turnaround."

One automaker definitely headed for a turnaround is Hyundai Motor America, which Edmunds sees getting an 8% improvement in monthly sales versus July last year, and a 14.5% boost over June. Toprak says Hyundai is benefiting in part from being an early mover in marketing the government program in early July. Ford was also early to bat with the program.

"Hyundai started selling the program before anyone else," he says. "They took a little bit of a gamble since program details weren't spelled out yet, which allowed them to create showroom traffic, and get pent-up demand from consumers waiting for the program. So they got early-adopter traffic into showrooms, and we think they will benefit from that."

Edmunds sees a handful of mass-market automakers benefiting most from CARS, based on the number of vehicles in their portfolios that offer high fuel economy and also based on consumer perception of their vehicles' fuel economy. Toprak says Toyota will benefit most, with 21% of its sales during the program time frame coming from CARS trade-in consumers. In second place will be GM, with 15% of total sales coming from such deals. The firm predicts that Honda will be third with 14% of sales from CARS, followed by Ford with 13% and Hyundai with 10%.

"That is based on percentage of qualifying vehicles and perception, so even if Toyota has 18% of eligible vehicles, they will benefit more because consumers perceive them as fuel efficient."

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