U.S. auto industry recovering faster than anticipated; Automakers headed toward best annual performance in three years

The U.S. auto industry is seeing demand recover faster than anticipated, with carmakers headed toward their best annual performance in three years at sales of 12.8 million vehicles.

Consumers entered this year’s final month demanding models ranging from big pickups to luxury sedans to fuel-sipping hybrids after pushing November’s sales to the fastest monthly pace since the government’s “cash for clunkers” trade-in program in August 2009. General Motors Co. (GM) and Chrysler Group LLC, two years removed from bankruptcy, have been taking share from disaster-stricken Toyota Motor Corp. and Honda Motor Co.

U.S. buyers are replacing their cars after delaying new- vehicle purchases as long as possible, and they are snapping up F-Series pickups and Prius hybrids as consumer confidence in the economy jumps. That means the automakers haven’t had to resort to fire-sale prices to goose demand.

“The industry has managed production levels to where demand was this year and didn’t get ahead of itself,” said Jeff Schuster, a Troy, Michigan-based analyst for LMC Automotive. “With inventory now being replenished, it’s not a situation where we’re seeing too much production or seeing heavy incentive use.”

Spending on marketing promotions averaged less than $2,700 a vehicle throughout the industry, down about $74 from a year ago, according to LMC and J.D. Power & Associates.

Consumer confidence surged in November by the most in more than eight years, and the portion of consumers planning to buy a new vehicle within six months climbed to the highest since April, data from The Conference Board showed Nov. 29.

The average age of cars and light trucks on the road today has risen to 10.6 years old, Jenny Lin, Ford’s senior U.S. economist, said on a Dec. 1 conference call.

“We are going to see more and more of this pent-up demand realized,” Lin told analysts and reporters.

She cited declining gasoline prices for providing “relief” to consumers, who responded with purchases of sport- utility vehicles and pickups. Sales of Dearborn, Michigan-based Ford’s SUVs climbed 29 percent and F-Series trucks increased 24 percent.

GM’s deliveries of Chevrolet Silverado and GMC Sierra pickups surged 34 percent and 22 percent, respectively, and Chrysler’s Jeep brand sales soared 50 percent. The average price for unleaded gasoline has dropped 71 cents, or 18 percent, to $3.28 a gallon on Dec. 3 from its peak this year on May 4, according to AAA, the nation’s largest motoring group.

Consumer demand was broad-based, as Toyota (7203) and Honda boosted deliveries of smaller vehicles, making up for production lost after March 11’s tsunami and earthquake inJapan and more recent floods in Thailand disrupted their supply chains.

Toyota, Asia’s largest automaker, reported a 49 percent increase in sales of Prius hybrid models, including its new wagon variant. Deliveries of its redesigned Camry sedan climbed 13 percent to 23,440, securing its position as the top-selling car line ahead of Nissan Motor Co.’s Altima and the Ford Fusion. Toyota slashed discounts on cars by 32 percent last month, according to researcher Autodata Corp.

Honda, the only automaker among the 10 largest that didn’t have a companywide U.S. sales increase for November, still managed to boost deliveries of Civic cars by 3.4 percent. That’s the first increase since April for the Tokyo-based automaker’s top-selling model.

Among luxury brands, Daimler AG (DAI)’s November deliveries jumped 47 percent, as the brand’s year-to-date sales closed to within 1,600 of Bayerische Motoren Werke AG (BMW)’s BMW line. The two German brands are vying to replace Toyota’s Lexus, the annual luxury champ for the last 11 years, which also lost production to the March disasters.

Industry sales accelerated to a 13.6 million seasonally adjusted annualized rate, according toWoodcliff Lake, New Jersey-based Autodata. The pace exceeded the 13.4 million average estimate of 14 analysts surveyed by Bloomberg.

“The recovery is showing a little bit more resiliency than what people feared,” Paul Ballew, chief economist for Nationwide Mutual Insurance Co., said in a Dec. 1 phone interview. “Vehicle sales are inching their way back up to 14-, and then eventually 15- and 16-million units.”

If December matches November’s 14 percent increase in industrywide deliveries, auto sales will finish the year at 12.8 million cars and light trucks. That would exceed the 12.7 million sales total that was the average estimate of 18 analysts surveyed by Bloomberg in August.

Jefferies Inc., IHS Automotive and TrueCar.com are now considering increases to their estimates for 2012 deliveries, according to analysts at the three firms.

Auto sales may total 13.5 million light vehicles next year, the average of 14 estimates compiled by Bloomberg. The industry delivered 11.6 million cars and light trucks last year, up from a 27-year low of 10.4 million in 2009.

The seasonally adjusted annualized rate for auto sales “appears to be building to a 2011 exit run-rate close to 14 million without a full Japanese supply recovery and bad economic news cycle,” Adam Jonas, a New York-based analyst for Morgan Stanley, wrote in a Dec. 1 research note. The momentum “bodes well for 2012,” he said.

Price War: Honda and Toyota Get Down and Dirty, helping to boost March auto sales

Price wars and discounting used to be the province of beleaguered companies from Detroit. Now Honda (HMC) and Toyota (TM) are down in the bargain mud, too — and helping to boost March auto sales.

Forecasts for annual U.S. auto sales for the month are around 12.5 million range for theSeasonally Adjusted Annual Rate. That’s a sharp improvement from a 10.8 million SAAR in January 2010 and 10.4 million in February.

“The shape of the U.S. SAAR over the rest of the year will largely depend on how long the industry’s pricing battle goes on,” saidBrian Johnson, auto industry analyst for Barclays Capital.

Toyota kicked off the discounting this month with offers of zero-percent loans, to boost demand in light of the unintended acceleration disaster. Honda responded with cheap, no-money-down lease deals.

Such steep discounts are unusual for the Japanese carmakers, because their cars have typically been in higher demand than U.S. brands. Last month, before the current round of price-cutting kicked in, Edmunds.com said Honda’s incentives averaged about $1,400, less than half the level of Chrysler, Ford and GM. Toyota incentives averaged about $1,800, according to the shopping and research web site.

Meanwhile, ChryslerFord (F) and General Motors are bending over backwards to cut production and try and reduce the need for deep discounts, especially since Chrysler and GM went bankrupt last year. The results have been mixed.

Edmunds.com CEO Jeremy Anwyl said in a written statement the Toyota deals are unlikely to last, because Toyota’s inventories of unsold cars aren’t that high. The Toyota deals are set to expire April 5.

“Although this SAAR sounds promising,”Anwyl concluded, “it’s too early to wave the flag and say that the economy has turned the corner.”

TrueTrends Report: Top 2009 and 2010 vehicles with the heaviest discounts

SANTA MONICA, Calif. — During this time of year, when the auto market is in the midst of a traditionally slow season and automakers are less apt to offer incentives, dealers are often more inclined to include discounts to help spur sales, according to TrueCar.

In light of this environment, TrueCar, as part of its monthly TrueTrends Report, announced the top 2009 and 2010 vehicles with the heaviest discounts, and showing a dominant presence on both lists were Big 3 brands.

Specifically, three Chevrolet models (Cobalt, Silverado 1500, and Corvette) were among the five models listed on the Top 2009 Greatest Discounted Models, a list that the Dodge Ram 1500 topped with an average discount of 27 percent.

The Kia Sorrento was No. 2 with a 23-percent discount, while the Cobalt was No. 3 (20 percent) and the Silverado 1500 and Corvette (17 percent) were tied for fourth.

Meanwhile, on the list of Top 2010 Greatest Discounted Models, three of the five vehicles were from Ford, including the Ranger, which led the way with a 17-percent discount.

The Edge was tied for third with a 13 percent discount (tying with the Toyota Tundra 2WD), while the Focus had the fifth-highest discount at 12 percent. Another domestic on the list was the Jeep Grand Cherokee, whose 16-percent average discount put it second.

“January is historically a very slow month for dealerships in terms of sales,” said Jesse Toprak, vice president of industry, trends and insights for TrueCar.com. “The manufacturers typically offer fewer incentives to consumers so the dealers are much more willing to offer discounts off of MSRP to help make more deals.”

He added: “So January could actually turn out to be a really great month for consumers who do their homework before they buy, as dealers are more motivated to make something from nothing.”

The complete top five lists are as follows:

Top 2009 Greatest Discounted Models

1. Dodge Ram 1500, 27 percent

2. Kia Sorrento, 23 percent

3. Chevrolet Cobalt, 20 percent

4. Chevrolet Silverado 1500, 17 percent

5. Chevrolet Corvette, 17 percent

Top 2010 Greatest Discounted Models

1. Ford Ranger, 17 percent

2. Jeep Grand Cherokee, 16 percent

3. Toyota Tundra 2WD, 13 percent

4. Ford Edge, 13 percent

5. Ford Focus, 12 percent

Moving on, TrueCar also unveiled in the report the Most Flexible Vehicles 2009 and 2010 models, which are calculated by its Price Flex Score. This considers various elements that can impact price variance, officials noted, such as transaction price range, current inventory and sales data.

Based on these scores, the most flexible 2010 model is the Chrysler PT-Cruiser with a score of 93, followed by the Mazda MX-5 Miata (90), Mazda 6 (88), Hummer H3 (86) and the Hyundai Accent (85).

For 2009 models, the H3 and MX-5 Miata were the most flexible, as both had scores of 97. The Dodge Viper was next (91), with the Volkswagen New Beetle (90) and Volkswagen EOS (89) rounding out the top five.

Moving on, TrueCar also unveiled what it has calculated to be the best day to buy a vehicle in the next 31 days. According to its data, Feb. 1 is the top day. TrueCar expects discounts to be 6.62 percent.

However, Jan. 25 and Feb. 8 are also projected to have discounts of more than 6.5 percent. Meanwhile, the lowest day for discounts is expected to be Feb. 9, when the average is projected at 5.42 percent.

Next, TrueCar looked at what new vehicles are staying in dealers’ inventories for the longest and shortest periods of time.

For 2009 models, the Acura MDX has had the shortest days on the lot, averaging 27. Meanwhile, the Saab 9-3, on average, has sat on the lot 358 days.

“Apparently, fears of becoming an orphan owner have kept consumers away from the Saab, with the 2009 9-3 averaging nearly a year in inventory,” officials explained.

Meanwhile, among 2010 units, the Lexus GX 460 ranks at the top of fastest turn rates, as it typically spends only five days on the lot, according to TrueCar. The Kia Forte has the longest time in inventory, averaging 72 days, officials added.

U.S. auto sales end ’09 on uptick; Ford surges

Tuesday January 5, 2010, 12:43 pm

DETROIT (Reuters) – Ford Motor Co (NYSE:F – News) posted a 33 percent sales gain for December as U.S. auto sales ended a crushing 2009 on an upswing after a year that saw GM and Chrysler collapse into bankruptcy and China overtake the United States as the biggest car market.

The Ford sales surge ran beyond the expectations of analysts and sent the company’s stock sharply higher. Ford shares powered above $11 to hit their highest level since August 2005.

The stock has gained 55 percent in a rally since early November and has more than quadrupled in value over the past year as investors bet that the No. 2 U.S. automaker would steer clear of the federal bailouts that wiped out equity in its domestic rivals.

“Ford’s plan is working,” Ken Czubay, the automaker’s head of U.S. sales, said in a statement.

Other automakers trailed Ford’s gain. Sales for Nissan Motor Co (Tokyo:7201.T – News) were up 18 percent in December. Chrysler’s sales dropped 4 percent.

General Motors Co was expected to post a sales decline near 9 percent.

After adjusting for population, U.S. auto sales suffered their deepest decline since World War Two in 2009. Full-year sales are expected to be just over 10.3 million vehicles, down 40 percent from where the industry began the decade in 2000.

In a historic reversal, vehicle sales in China surged to overtake the U.S. market as the world’s largest in 2009.

With a final sales tally due later this week, analysts expect China sales to have soared 44 percent to 13.5 million units in 2009. Slower growth is projected for this year.

Meanwhile, major automakers are betting that the U.S. market is poised for a gradual but steady rebound this year and next and have set production plans higher for the current quarter to restock inventories.

U.S. auto sales on average are expected to come in above an 11 million unit annualized sales rate in December. That would represent the best sales month of 2009 excluding July and August when U.S. government trade-in incentives gave sales a temporary boost through the “cash for clunkers” program.


U.S. auto dealers and analysts said December sales results were boosted by bargain-hunting shoppers taking advantage of holiday discounts and by two additional sales days in the month compared with a year earlier.

In one of the most aggressive incentive offers, GM gave its dealers up to $7,000 — a discount of almost 50 percent in some cases — to buy up remaining inventory of the discontinued Pontiac and Saturn brands still on their lots.

GM expects that move to have effectively cleared out old Pontiac and Saturn inventory, allowing it to start 2010 with a clean focus on its remaining four U.S. brands: Chevrolet, Cadillac, Buick and GMC.

GM sales results are expected to have dropped near 9 percent on an overall basis, reflecting a sharp contraction in shipments to fleet operators led by car rental agencies.

But GM sales managers are likely to point to success in increasing more profitable retail sales, lowering inventory to near record lows and cutting the overall amount that the automaker spent on incentives.

Chrysler, now controlled by Fiat SpA (Milan:FIA.MI – News), has also been battling to reduce a reliance on cut-rate fleet sales that have topped half of its overall sales in recent months.

The GM and Chrysler bankruptcies left GM held 60 percent by the U.S. Treasury and Chrysler under the management control of Fiat CEO Sergio Marchionne.

GM and Chrysler took the brunt of the industry’s collapse in 2009, but their stronger rivals were hit as well.

Toyota’s U.S. sales had plunged nearly 24 percent through November and it faces the aftermath of its largest-ever recall to fix accelerator pedals on nearly 4 million vehicles after reports of sudden bursts of acceleration that led to deadly crashes.

Edmunds.com:December sales could be the highest non Cash for Clunker month of the year.

Car Sales Surged at December’s End, Edmunds.com Reports
JANUARY 4, 2010

Car shopping on Edmunds.com surged in the waning days of December, prompting the Web site to suggest sales for the month may come in higher than previously expected – and could be the highest non Cash for Clunker month of the year.

“The industry potentially could reach a seasonal sales rate of 11.7 million vehicles in December, given the current site traffic trend,” noted Edmunds.com Senior Analyst Jessica Caldwell.

“Our Web site activity is through the roof,” added Caldwell. “That makes sense as there are so many bargain-hunters scrambling to get year-end deals and cash in on the sales tax deduction opportunity that expires on December 31st.”

An improving economy likely has helped as well. Edmunds.com Web activity in late December is 60 percent higher than the histocial pattern for the period. Brands enjoying particularly strong activity are BMW, Ford, Honda and General Motors’ Chevrolet, Pontiac and Saturn brands.

History suggests that the type of Edmunds.com visitor activity tracked for this study typically has a strong correlation to actual sales.

Site activity is up across the board. However, some brands experienced better than average interest in the last days of the month compared with the first three weeks of December. Among them:

BMW – Activity increase nearly 70 percent, likely due to its heavily publicized “BMW Joy Sales Event” and its television ads, obviously poking fun at competitor Lexus with a BMW blasting away leaving the big red bow in its wake.

Chevrolet – Activity increased nearly 85 percent, likely due to “Red Tag” event that includes “Holiday Cash” and zero-percent financing for 72 months on such popular models at the Chevrolet Malibu.

Ford – Activity increased nearly 100 percent; may be due to “Ford Year-End Sales Event.”

Honda – Activity increased nearly 100 percent; may be due to increased advertising of “Happy Honda Days.”

Pontiac, Saturn – Activity for GM’s soon-to-be-oprhaned brands soared, likely due to the immense amount of media hype regarding close-out deals. Pontiac saw more than 10 times as much activity; Saturn nearly 10 times as much. — Michelle Krebs, Senior Analyst and Editor at Large

U.S. auto sales may rise 20% on pent-up demand as recovery starts

U.S. auto sales will rise 20% in 2010, buoyed by pent-up demand and stronger credit markets, as the industry starts recovering from its worst year in almost three decades, a researcher said.

Deliveries will climb to 12.4 million from 10.3 million in 2008, the Ann Arbor-based Center for Automotive Research said Tuesday. U.S. sales were 13.2 million last year, after averaging 16.8 million this decade through 2007.

“No recession has ever been this long in terms of cumulative job loss,” Sean McAlinden, CAR’s chief economist, said at a briefing in Ypsilanti. “Will we ever see the 17 million sales levels we saw a few years ago? No, that was truly an automotive sales bubble.”

The forecast exceeded four projections by consultants and analysts for U.S. industry deliveries in a range of 11.3 million to 11.8 million light vehicles. Sales at those levels would enable General Motors and Chrysler Group to make money in the United States based on their plans to cut expenses.

Both automakers reorganized in bankruptcy this year. Chrysler has said it expects to break even in 2010 with industry sales of 11 million units and a 10% market share. In March, GM gave a target of paring expenses to the point where it could break even with industry volume at 10.5 million units.

GM and Chrysler “have done enough cost reductions to break even in North America,” McAlinden said. He said GM probably won’t reach that goal in 2010 because it still has 6,000 workers on furlough, inflating its costs.

Sales in 2010 will resume gradually, McAlinden said. “You’ll see lousy sales numbers through the spring and then it will break, but not through the roof.”

NADA Used Car Guide: Trade-In Values of Trucks Likely to be Strong Next Month

NADA Used Car Guide: Trade-In Values of Trucks Likely to be Strong Next Month

December 17, 2009

McLEAN, Va. — During the first month of 2010, several used-truck segments are expected to show year-over-year value increases, according to NADA Used Car Guide, which also indicated that most car segments will still show double-digit decreased compared to January 2009. 

For instance, the NADA average trade-in values of large SUVs is expected to jump 16.61 percent from January 2009, large pickups are expected to increase 14.16 percent and midsize SUVs are projected to climb 6.74 percent. 

“This unprecedented increase is again a result of lower fuel prices, which brought consumers back to used trucks, driving up prices from the low points when demand for these segments was virtually non-existent,” explained Jonathan Banks, senior director of editorial and data services for NADA Used Car Guide.

“The decline in overall used supply has also been an important driver in the strength of used-vehicle values, especially for the truck segments,” he added. 

Banks said these have climbed due to increases in demand and shorter supply, which has been caused, in part, by the following: 

—The stabilization that occurred in January of previously volatile gas prices. “As gas prices fell, renewed consumer interest in the above segments increased demand, even while supply remained static or, in some cases, fell,” Banks noted. 

—Strong wholesale demand. “Traditionally, dealers relied on trade-ins for their used vehicle inventory,” he continued. “However, lower than average trade-in volume, driven by a lower supply of leased returns and sluggish new vehicle sales, has sent record numbers of dealers to auction to secure used vehicles. Increased demand for fewer units has created higher wholesale prices.”  

—Wholesale demand was also boosted by such market factors such as the credit crisis, limited automaker incentives, reduction in new-vehicle production and CARS.  

“Elevated prices on the wholesale side eventually translated into higher retail values,” Banks continued. “Fewer used vehicles in the supply chain caused used-car prices to rise as demand rebounded, especially in the light truck and SUV and CUV segments.”

Meanwhile, car values are expected to continue to be softer in January across all segments, according to NADA Used Car Guide data. For instance, entry compacts are projected to be down 28.96 percent year-over-year in January, and intermediate compacts are projected to be off 24.84 percent. 

Banks said there has been a slowdown in passenger cars’ Used Car Guide values this year due to a number of factors. 

“Used Car Guide values for the majority of passenger cars were down for CY 2009 on a year-over-year basis, reflecting the generally poor condition of the economy, overall market volatility, and of the remarkable shift in demand from cars to trucks/SUVs over the course of the year as fuel prices receded from their 2008 highs,” Banks observed. 

Moving on to look at initial December wholesale prices, AuctionNet data suggests that most segments have been relatively stable in the first week of the month compared to November. 

Van prices were down just less than 2 percent from November and CUV prices dipped more than 0.5 percent. Cars and pickup climbed less than 0.5 percent, while SUVs appeared to be relatively static from the previous month. 

As far as NADA’s Weekly Historical Volatility Measure, the prices of compact CUVs have been the most volatile in the first week of December with an HVM score of 17.1 percent. They were followed by large SUVs (16.6 percent), large pickups (15.8 percent), intermediate compacts (13.6 percent) and midsize vans (12.9 percent). 

The set average was 12.2 percent. 

Conversely, the segment with the least volatile prices was midsize CUVs, which had an HVM of 8.2 percent. Also below the average were luxury large SUVs (8.6 percent), luxury large (8.9 percent), intermediate midsize (10.3 percent), intermediate large (11 percent) and premium luxury large (11.3 percent). 

Moving on, Banks offered more insight into the market, adding: “October-to-November transactional sales averages declined gently which may indicate that the worst of the typical autumn/winter sales decline reached bottom in October.  

“When put into historical context, November sales averages were fairly strong, excluding the Thanksgiving holiday week,” he continued. 

Banks went on to note that initial returns of many 2009 models were “very low” as December began. 

“This low volume and relatively strong dealer and consumer demand has helped maintain price strength across the board,” he explained. “However, NADA believes that as a more steady used supply manifests itself, prices will moderate and return to the more traditional historical gap between wholesale and retail prices.” 

As far as January goes, NADA expects the used market will be somewhat static. Banks pointed out that on the new-car front Toyota has boosted production. More specifically, this was done to tackle inventory shortages. To meet the demand, the automaker has added shifts at its San Antonio, Texas, plant and started overtime at its other plants in North America. 

“This indicates that despite a down (but slightly improving) economy, there are still supply shortages, which should help keep used prices strong in the near-term,” Banks shared. 

“With this said, NADA does not anticipate the same degree of year-over-year strength on most trucks because similar increases in used-truck values would see them priced higher than comparable new vehicles,” he concluded.