Day Supply Continues To Rise
Updated: Jan 30, 2019
In their recently released forecast, J.D. Power expects retail sales to fall by 2.4 percent for the month of January. Using the J.D. Power retail sales estimate, my day supply reading climbs to the highest level in 17 months.
In the past, incentive spending has increased ahead of production cuts in order to manage high inventory levels. In what appears to be a clear break with tradition, incentive spending is expected to fall for the 7th month in a row despite the rapid increase in day supply. In my opinion, this is a clear sign that there's too much focus on increasing/protecting margin and not enough on proper inventory management. The fierce focus by most manufacturers on margin is putting production volume at serious risk.
At this point, I would not be surprised if we skip step one (increased incentive spending) and proceed straight to step two (significant production cuts) in the early to middle part of this year. For more on what this means for auto-related stocks, please watch my latest Real Vision interview.
These are my opinions and the content contained in or made available through this article is not intended to and does not constitute investment advice. Your use of the information or materials linked from this article is at your own risk.