Morgan Stanley Comments On Auto Industry

Analysts at Morgan Stanley commented on the automobile industry in a note Thursday.

August SAAR came in at 17.5 million; the highest SAAR since July 2005. Dealer incentives increased 18.5 percent year over year. Analysts feel the recent spike in SAAR is primarily driven by financing incentives.

Analyst Adam Jones stated, "The growing trend of 84 and 96 mo.car loans coupled with higher sub-prime leasing makes us particularly concerned that today's boom in auto sales is a result of unsustainable practices which are pulling forward demand from future periods.

"We believe investors who are increasingly aware of today's sales tactics will find it difficult to justify paying up for earnings beats stemming in large part from future borrowing of demand, precipitating what we fear could be the largest decline in used car prices in history."

Detroit's Big Three market share dropped slightly. Chrysler is the only Big Three manufacturer that experienced an increase in market share year over year, gaining one percent.

Toyota Motor Corp (ADR) (NYSE: TM) and Nissan Motor Co Ltd (ADR) (OTC: NSANY) supported the Asian market share gain. Toyota's market share increased from 14.4 percent to 14.6 percent year over year, while Nissan's grew to 8.6 percent from eight percent.

European OEMs lost market share mainly due to Volkswagen's (OTC: VLKAY) decrease to 2.2 percent, from 2.7 percent, since last year.