There's a Disconnect in the Latest Auto Sales Figures

(Bloomberg) — A key figure used for decades to sum up the state of the auto market looked wildly out of step with carmakers’ own sales reports this week, and the dissonance could continue for months to come.

The seasonally adjusted annualized rate, or SAAR, attempts to translate the level of demand for new cars and trucks each month into a figure that gives investors and economists a sense of how the whole year may shake out. On Tuesday, Japan’s three largest automakers posted double-digit percentage drops, but the industry ended up registering a relatively strong SAAR of 17.2 million.

The reasons for the disconnect are complicated. The statistical adjustments used to smooth out month-to-month swings based on factors such as the time of year and number of selling days provided a big boost to the September SAAR. Another issue is that General Motors Co (NYSE:)., Ford Motor (NYSE:) Co. and Fiat Chrysler Automobiles NV no longer publicly report monthly U.S. sales, potentially leading to more months where the industry sales rate looks much different than figures released by those companies still publicly posting results.

For Haig Stoddard, an analyst at Ward’s Automotive Group, which publishes a SAAR on a monthly basis, the confusion over September’s figure captured why the measure was never perfect to begin with. Carmakers have long managed to distort the number by boosting incentives or deliveries to car-rental fleets, as they have this year.

“There’s just too much noise in the numbers to come up with the perfect seasonally adjusted rate,” said Stoddard, whose firm continues to privately collect sales data from the Detroit Three. “You should never put too much emphasis on a one-month result.”

GM, Ford and Fiat Chrysler combined sell almost half of the vehicles in the U.S. They’re not the only ones sitting out public reporting of monthly sales — Tesla (NASDAQ:) Inc. has avoided the practice for years.

Even before the Detroit Three switched to only putting out figures publicly every quarter, the SAAR was already flawed, said Maryann Keller, a longtime industry watcher and consultant.

“It’s easy for car companies to play games and manipulate the market with incentives,” she said. “The SAAR isn’t as good a measure as an economic indicator as it was years ago because of the manipulation of the market.”

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