How Far Will Volkswagen Group's U.S. Sales Tumble This Month?
TrueCar analysts are predicting a very strong seasonally adjusted annualized rate (SAAR) for total light-vehicle sales when September figures are tallied: TrueCar estimates the SAAR to reach 17.7 million units in the U.S. for September, favorable to the 16.5 million SAAR a year ago. In addition to strong Labor Day sales, which boosted September retail sales figures, there are multiple factors boosting sales in the U.S. market currently.
According to TrueCar, in a press release:
Interest rates remain unchanged and overall U.S. economic conditions are still strong. The Conference Board's Consumer Confidence Index® rebounded by 10.5 points in August, hitting 101.5. Meanwhile, the unemployment report in August was 5.1 percent, the lowest for the month in eight years. Gas prices also remain favorable, falling to a national average of $2.28 per gallon on September 23 from $3.34 a year earlier.
However, you've probably noticed that Volkswagen Group isn't having such a great September amid its diesel emissions testing scandal . Here's a look at what Volkswagen investors can expect in terms of a negative sales impact, and why it matters.
In case you're not fully up to date on the issue, here's a quick recap of what Volkswagen's debacle is about. Essentially, Volkswagen had equipped its 2.0 liter TDI diesel four-cylinder cars starting from the 2009 model with special software that would detect an emissions test and "clean up" the engine exhaust to pass the test. During normal driving, however, the vehicle's exhaust was much dirtier than laws in the U.S. allow.
This obviously has a negative impact on Volkswagen's entire brand image, but diesel sales generated 22% of the company's sales in the U.S. last month, which is much more than other global automakers. Further, Volkswagen admitted that roughly 11 million cars with the software have been sold across the globe. This scandal will negatively impact Volkswagen's sales across the globe; but just how much will it dampen Volkswagen's sales in the U.S. this month?
Despite selling at a normal pace through part of the month, estimates from both Edmunds.com and TrueCar, believe it will put a dent in September's sales figures, and likely even more drastically in the months ahead. According to Edmunds.com, Volkswagen will be the only major automaker to check in with a decline in U.S. sales for September compared to the prior year. Volkswagen's U.S. sales are expected to drop 2%, which is a far cry from the industry's expected 13.9% . Compare it, as well, to some top automaker estimates such as Ford and Toyota, which are expected to post respective gains of nearly 22% and 16.3%.
TrueCar expects a more drastic drop for Volkswagen's U.S. sales this month: a 5.2% decline compared to last year. Further, those unit estimates are units sold from Volkswagen to dealerships; retail sales -- sales from the dealership to consumers -- are expected to be hindered even more as the consumer backlash against the automaker reaches full effect. Here's a look at TrueCar's September retail sales estimates in the U.S.; it's brutal for Volkswagen.
General Motors: 13.8%
Fiat Chrysler Automobiles: 10.8%
Ultimately, even though Volkswagen had been a very solid investment in the global automotive industry, this is a scandal that likely won't blow over quickly, and will have lasting impacts on its diesel sales in the U.S. and abroad. Expect Volkswagen's sales to get much worse in the U.S. before they get better. This will be a big obstacle in the path of the company trying to become the world's best-selling automaker in 2015.
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The article How Far Will Volkswagen Group's U.S. Sales Tumble This Month? originally appeared on Fool.com.
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