A Look At September's Strong Auto Sales

Investors were treated with particularly strong auto sales data this week as September U.S. light vehicle SAAR (seasonally adjusted annualized rate) read 18.6 million, which was notably higher than the consensus estimate of 17.4 million.

September's SAAR reading also happens to be the strongest dating back to mid-2005 and the sixth-best monthly SAAR since 1980, Barclays' Brian Johnson commented in a report. There were several contributing factors to the strong reading, including Hurricane Harvey and Irma, which contributed at least 300,000 units to the SAAR reading.

Dealer incentive levels were also higher as industry-level incentive per unit rose by 3 percent and incentives as a percentage of average transaction price rose 80 basis points year-over-year to 12.9 percent, the analyst added. Fleet sales contributed to the strong reading as Ford Motor Company F's fleet sales rose 25 percent and General Motors Company GM's fleet sales rose 28 percent.

While September's numbers are supportive of the auto industry investors should be "skeptical" about further room in the auto trade, Johnson said. Moving forward upcoming SAAR monthly reads should dip lower and read north of 17 million and this figure would include 200,000 to 300,000 of auto units, which are merely replacement sales from the hurricanes.

"That said, sentiment feels rather exuberant, with auto stocks seemingly pricing much of this in," Johnson concluded. "And while we can't see the downside catalyst ahead, we believe the 'right' negative data point could reverse the trade."

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Ford Higher On Better-Than-Expected Auto Sales