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June 1, 2005
May Auto Sales: Lies, Damned Lies, Statistics, Lazy Journalists and PR Hocus-Pocus
Your friend Frank at the Notebook has just completed his analysis of U.S. auto sales for May 2005, and guess what? Sales are down.
For the entire industry, sales fell 8%. The bad news is spread pretty evenly this month, among domestics and international automakers. There were a few winners, most notably Nissan, where sales were up 6.6%.
There are two things annoying me about sales reporting right now that only a true noodge could care about, but since I don't print on paper I can take up all the column inches I want.
FIRST: While GM and Ford sales fell, so did most everyone else's with the exception of Nissan among those companies in the million-selling club. What that means is, international nameplate did not pick up any additional market share, though that is what you are reading in other stories.
And I'm not writing this as a homer for the domestics, last year I was one of the first journalists to start pounding away at the 40% market share achievement of the traditional foreign car makers.
However, what journalists are doing as the numbers come out -- and seeing GM and Ford down -- is jumping to the conclusion that the internationals had subsequent sales gains.
Thus the erroneous conclusion that the domestics lost more market share. This month that was not the case. Domestic market share is approximately 57.7%, while internationals are at 42.2%. This represents a slight decrease in share for internationals compared to last month. They still have a greater share of the market than ever, but additional pieces of the sky did not fall in May.
SECOND: Faced with a drop in sales, PR people pull out a handy little tool to confuse people. It's called using the Daily Selling Rate [DSR] calculation to convince you that a loss was actually a gain. Like I said, this is for nerds, but it drives me nuts, so let me explain.
Let's say you sold a 100 cars in May last year, and only 98 cars this May. To even those only qualified to work a register at McDonald's with little glyphs of Big Macs on the buttons, this represents a 2% drop in sales.
Enter the magic potion of DSR, however, and you can turn that deficit into a surplus! Here's how:
If you sold 100 cars last year in 26 days, according to the DSR incantation, you sold 3.84 cars per day. If there were only 24 days in the month this year, your 98 sales represents 4.08 cars per day.
Now, to be able to truly compare sales from year to year, so the DSR chant goes, you have to compare the units per day, and not the actual results.
So what this means is you take this year's 4.08 cars per day, multiply that by the 26 days from last year -- and then you get the "actual" performance. Which in this case equals 106.16 cars sold, all things being equal.
In other words, by selling 98 cars this year, that represents a 6% sales increase from last year's sales of 100 cars. You understand that, right?
The thing that really drives me nuts is some companies switch calculations from month to month, depending on which formula produces the better numbers.
I'm not going to name names, but when you read other reporters' stories, see how many of them fell for the Full DSR Monty. It's easy to spot -- just look for the statistics that don't make sense. At least to people with a calculator.
Posted by Frank at June 1, 2005 8:40 PM | Filed under Auto News
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