Jumpstart Automotive Group

It seems difficult to remember when the US auto market wasn’t making global headlines every day across all media outlets for its plummeting sales, financial troubles, plant & dealership closures and the inevitable bankruptcy filings. In reality, just one year ago in May 2008, we were reporting on the highest sales of the year, and for Jumpstart Automotive Group, the month of the greatest shopping activity and consumer engagement on our sites. The early spring had shown signs of hope for an industry that was facing a bleak outlook, but unfortunately we all know the reality the industry faced thereafter. Not only were the analysts correct in forecasting the demise of certain manufacturers, but with the financial crisis that hit the US market, the auto industry exceeded the anticipated struggles by the fourth quarter or 2008.

The trends continued downwards in early 2009, despite the hopes of early recovery. Two of the Big Three US auto manufacturers filed for bankruptcy, shedding legacy brands, creating alliances with foreign automotive partners to help keep them afloat, and are still closing dealerships day after day. If spring represents a transitional period from the extreme of winter to the extreme of summer, could this season also be representative of a transitional time for the auto industry? We’ve reached some tough decisions and are working our way out of one of the most difficult times the industry has ever seen through drastic cost-cutting measures, reorganization, new leadership and alliances. Will we emerge with renewed confidence and be better positioned for growth?

Signs of Hope

Our monthly shopping trends have shown positive signs of growth over the course of the spring, and the gap between industry sales and online automotive shopping activity is starting to narrow. Table 1.1 below shows Jumpstart volume in unique visitors to our sites compared to industry sales volume. Following May, 2008 both industry sales and shopping activity began to drop off through the end of the year. Though sales saw a small spike in December and shopping activity increased in January, the correlation between the two saw a drastic divergence in the first quarter of 2009.

Table 1.1 Jumpstart Automotive Group’s Traffic vs. Industry Sales (Units)

The amount of uncertainty during the first quarter this year helps to understand the gap between sales and shopping activity. Though consumers have still been browsing around, the actual purchase activity is taking longer to transact. Many factors such as a new presidential administration, unemployment rates, the collapse of the housing market and the health of the banking and automotive industries, contribute to the overall confidence in the market.

Recently, the index of US leading economic indicators was up for the second month in a row in May, the first month-over-month increase since September & October 2006. These results that are driven by gains in stock prices, consumer confidence index, factory hours, and an increase in building permits are leading analysts to believe that our economy could begin growing by the second half of the year.

With regard to the automotive industry, there have been early signs of recovery. Despite the bankruptcy filing of both Chrysler and General Motors, we see below in Table 1.2 that both manufacturers recognized increased unit sales from April to May (3% and 11% respectively), with both months having equal selling days. It’s possible that the bankruptcy filing and reorganization of the two manufacturers provided some relief in our economy as we’ve sat in anticipation over their fate for the past twelve months.

Table 1.2 U.S. Light Vehicle Sales by Manufacturer, April — May, 2009

Outside of Chrysler and General Motors, most of the larger manufacturers also recognized significant unit sales growth from April to May, 2009, with only Honda seeing a decline of 3%. Though the industry is still reporting an overall decrease of 37% in volume YTD, there has been some notable movement during this transitional period over the past two months. With an increase in consumer confidence, market indicators that are showing some signs of recovery, and two of the largest auto manufacturers going through re-organization, we look forward to emerging from this recession with a stronger automotive industry.