Red hot streak in US auto sales continues in September

US auto sales surged to a seasonally-adjusted annualized rate of 18.06 million units in September, following a red-hot 17.7 million units sold in August. This is the highest pace of sales recorded since 2005 and well above the consensus estimate of 17.6 million units. September's tally was boosted by Labor Day weekend sales, which were included in August last year, making the year-over-year comparison unfair. Still, there were sizable gains across the board. Of the top eight selling brands, Ford (+24.2% y/y), Kia (+22.6 y/y) and Nissan (+18.3% y/y) led the way, while the remaining five all posted gains in the 12-16% y/y range.  

Volkswagen - which has been in crisis management mode since mid-September after admitting that it rigged emissions tests on a number of diesel vehicles, and has consequently halted sales of certain models in the U.S. - had a relatively flat performance (0.6% y/y) during the month, lagging behind the 16% y/y industry average. 

The Volkswagen scandal has been in the spotlight in recent weeks, with many wondering how it will impact the auto industry. In terms of the impact on diesel vehicles, near-term sales will likely fall given that sales of several models have been halted.  However, a number of other automakers will be introducing new diesel models over the next two years, providing more options for consumers. Moreover, automakers have suggested that clean diesels will play a key role in meeting tough environmental standards.

In terms of sales, Volkswagen will bear the brunt of the hit - with competitors possibly standing to gain. The impact on Volkswagen's sales thus far is hard to determine from today's data, as the revelation occurred mid-month. That said, anecdotal evidence suggests that sales were hit hard during the latter part of the month. The longer term implications for the automaker will depend on how it manages the crisis and if it can restore its brand image. 

Scandal aside, auto sales in September were quite strong, driven by Labor Day promotions, higher incentives and rising demand for trucks. Going forward, decent job growth combined with favorable financing terms should help to keep auto sales elevated, albeit down from September's high.