Last updated Wednesday, September 7, 2011
A Shift Begins
It's been a while since we have seen a real downward shift in the market, but that is what I think we're beginning to see now and we expect it to continue for a while. Retail demand seems to be down in most segments and wholesale demand will suffer accordingly. Perhaps the recent deficit reduction concerns and economic uncertainty resulting in the stock market downturn is largely responsible for weak demand. It would follow that the segment most affected would be the luxury vehicles, and that appears to be the case. We have been seeing a general retreat in those segments most positively affected by the spring fuel price hikes and the Japanese tsunami. These segments, primarily econo-cars and trucks and compact to mid-sized cars, have been eroding steadily for the past several weeks in something of a return to normalcy. We expect that to continue as we move into fall and enter what is usually experienced as a seasonal decline. Those segments that were most negatively impacted by fuel prices and had been gaining strength in recent weeks seem to have peaked and we would expect them to begin to retreat seasonally as we move forward. We're talking primarily of full size pickups and SUV's.
Luxury Vehicles Problematic
The segment that seems most affected by recent events is the European and Asian luxury market, both cars and trucks. While they had been eroding somewhat steadily but not steeply, the demand for them seems to have dried up precipitously, and all but the most desirable and/or exceptional of them are attracting very little attention in the lanes and have become very difficult to sell. We think there may be a bit of a slowdown in this decline if the economy feels better and the stock market recovers a bit, but overall we expect these vehicles to be problematic as we move towards winter. Typically the more expensive of these vehicles are also most prone to serious erosion.
As would be expected, sport coupes and convertibles - Mustangs, Corvettes and their ilk - which have held up pretty well over the summer are falling quickly and bear watching carefully in the near future.
We keep stressing that there is a vast difference between exceptional vehicles - with respect to condition, mileage, color, equipment, and scarcity - and their more ordinary brethren. That remains to be true even as we see a generalized negative shift in the market.
Affordable Quality Still King
Quality price range vehicles continue to be good merchandise and are largely immune to what the rest of the market is experiencing, but we expect them to be dragged along with the overall market, perhaps to a lesser degree, as we move into fall.