Smarter automakers, confident consumers driving car sales back up

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.

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.

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.

Of the three US automakers, the Chrysler Group saw the greatest boost in year-to-year sales gains, with sales soaring 21 percent in 2012, compared with Ford Motor Co. and General Motors, which enjoyed 4.7 percent and 3.7 percent sales gains, respectively.

Chrysler said Wednesday its year-end sales of 1.7 million vehicles represented its best year since 2007. In a statement, the company reported that its continued sales records are the result of sales increases in its Jeep brand, which increased 13 percent last year over the year before, and Dodge, which had the largest sales volume of any Chrysler Group brand.

Ford sold 2.2 million units and GM 2.6 million in 2012. In a teleconference with reporters Thursday, Ford US Sales Analyst Erich Merkle said the company was enjoying a 29 percent sales boost from its small car segment, such as the Focus, Fiesta, and C-Max, which is higher than the industry average. While the company’s truck division remains strong – the company’s F-Series of pickup trucks remain the best-selling brand in its segment – Focus sales increased 40 percent and are responsible for a third of sales growth, more than any other Ford model.

Japanese automakers Honda, Nissan, and Toyota also demonstrated they were in full recovery from the 2011 tsunami and earthquake that depleted inventories and subsequently hurt sales. Toyota unit sales increased 27 percent, while Honda trailed at 24 percent and Nissan at 10 percent.

Ms. Caldwell noted that Toyota represented the greatest percentage increase in year-to-year unit sales for any automaker and predicted that Prius, its best-selling hybrid brand, “should only get more popular as the hybrid and electric market steadily gains more steam.”