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Smarter automakers, confident consumers driving car sales back up (+video)

Despite being near collapse four years ago, the US automotive industry is seeing annual sales that are climbing steadily back up toward pre-recession levels.

By Staff writer / January 3, 2013

In this December photo, Honda Civic and Honda CRVs are seen outside of a Honda car dealership in Des Plaines, Ill. The US automotive industry is creeping back up, the combined sales of light trucks and vehicles in 2012 reached 14.5 million units, a 13 percent increase from the previous year.

Nam Y. Huh/AP

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Even though it neared collapse four short years ago, the US automotive industry is creeping back up toward year-end unit sales it enjoyed before the recession hit in 2008.

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The combined sales of light trucks and vehicles in 2012 reached 14.5 million units, a 13 percent increase from the previous year. In 2007, one year before the economic crisis, automakers reported selling 16.5 million vehicles, but by 2009, sales plunged to 10.3 million sold.

While the annual growth in sales has been modest at times, unit sales are expected to once again break the 16 million barrier by 2015, says automotive analysis firm R.L. Polk & Co. of Southfield, Mich.

“The industry right-sized itself,” says Lonnie Miller, vice president of marketing and industry analysis at Polk. “Now you’re seeing the car companies operate in an environment where consumers are feeling better about buying, automakers are not putting unnecessary product into production or giving away incentives to drive sales artificially.

“That,” he says, “will ultimately help profitability and drive true competition. The ones really hurting in the recession got very aggressive about fixing what needed to be done.”

Several economic factors are driving sales upward: easier credit availability, lowering interest rates for financing and leasing, and a stabilizing housing market that, while not directly related to automotive sales, “is making people feel better in general about their economic situation,” says Jessica Caldwell, a senior analyst at Edmunds.com, an automotive analysis firm in Santa Monica, Ca.

Consumers are holding onto their cars longer than they ever have in the past, choosing to repair or maintain their vehicles rather than spend more to purchase new. However, the breaking point to ditch the old vehicles and head to the showroom seems to have arrived: The average age of vehicles on US roads is now 11.2 years, says Polk. While some of those older vehicles may remain on the driveway – the average US household owns 2 vehicles – others may be ditched for refreshed vehicles that offer better safety features and improved fuel economy.

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