Most automakers report boom in December sales
Car dealers are seeing buyers come back to their showrooms -- giving the beaten-down auto industry a glimmer of hope that a long-awaited turnaround has begun.
Most automakers Tuesday reported big U.S. sales gains in December, with Ford and Toyota notching gains of more than 30%. Hyundai and Kia beat their year-earlier numbers by more than 40%.
Big discounts, heavy advertising and low finance rates helped jump-start the sales. Automakers were also helped by the fact that December 2008 was one of the worst auto sales months on record and thus was an easy target to beat.
Still, the size of December’s increase -- on the heels of a slight uptick in November -- is fueling optimism that the long sales decline is ending.
Experts point to a combination of higher prices for used cars, an aging U.S. auto fleet, a smaller inventory of late-model used vehicles and wider availability of consumer credit for the expected recovery.
“People can’t hold on to their car indefinitely. At some point they will have to buy either another used car or a new one,” said Michelle Krebs, an analyst with auto information company Edmunds.com.
Analysts and auto executives expect sales this year to rise at least 10%, to 11.5 million light vehicles, over last year. But that’s far from certain, as sluggish job creation and shaky consumer confidence could put a dent in the strength of the recovery.
“We are expecting slow and steady improvement, but we are not going to see anything near a boom,” said Aaron Bragman, an analyst with IHS Global Insight, an economic forecasting firm.
December’s 15.1% jump in total sales, to 1.03 million vehicles, according to Autodata Corp., marked the second consecutive month of year-over-year increases. Sales in November rose, though by only 139 vehicles.
The only other gain last year came in August, fueled by the federal government’s cash-for-clunkers stimulus program.
The growth in the last two months is “a good sign of stability in the market and modest growth ahead,” said Donald Esmond, senior vice president of Toyota Motor Sales USA Inc.
For the year, though, automakers felt the effects of the recession and growing unemployment. They sold 10.4 million vehicles last year, down 21.2% from 2008 and the fewest since 1970.
Galpin Ford of North Hills sold 803 vehicles last month compared with 327 the same month a year earlier, said Beau Boeckmann, Galpin’s vice president.
“It’s been almost like the good old days here,” Boeckmann said.
But he remains cautious, noting that even if this year’s industry sales approach 12 million, the figure would still be below the 2008 total and far lower than the roughly 16 million autos sold a year for much of the last decade.
“We have seen some improvement, and I think everyone is feeling more confident, but I remain worried about California and the state of its economy,” Boeckmann said.
David Conant, chief executive of Conant Auto Retail Group, which owns eight Honda, Ford, Toyota, Acura and Infiniti dealerships in Southern California, said his combined sales rose 24% over December 2008.
“It was very encouraging, but it was an easy month to beat,” Conant said, adding that he would want to see three or four months in a row of similar results “before I would call it a trend.”
Ford performed the best of the large U.S. automakers last month, with its sales jumping 33.5%, to 178,063, in December compared with the same month in 2008, according to Autodata. Full-year sales fell 15.3% to 1.62 million.
The company’s share of the U.S. market grew by more than a full percentage point to 15.5%, the first time Ford has gained annual market share since 1995. Yet it’s still far below the company’s 24.5% share of auto sales a decade ago.
Among the other larger manufacturers:
* Toyota sales rose 32.3% to 187,860 but slipped 20.2% for the year to 1.8 million.
* American Honda Motor Co. sales jumped 24.5% to 107,143, though annual sales fell 19.5% to 1.2 million.
* Hyundai Motor America monthly sales rose 40.6% to 33,797, while sales at sister company Kia Motors America soared 43.7% to 21,048. Together, the two Hyundai-owned brands now have 7.1% of the U.S. auto market.
* At the other end, General Motors Co. and Chrysler Group, both of which went through a government-backed bankruptcy last spring, saw monthly sales declines of 5.6% and 3.7%, respectively.
GM attributed its drop, to 206,670 vehicles, to a corporate strategy of reducing sales to auto rental companies and shutting down its Pontiac and Saturn brands.
GM is still working to close Pontiac, Saturn and Saab and to sell Hummer. Without them in the mix, sales of its Buick, Cadillac, Chevrolet and GMC cars and trucks rose 2.8% in December from a year earlier.
Chrysler has lagged behind its rivals all year, but its drop in December sales to 86,523 was an improvement over its sales plunge of 35.9% for the year to 931,402 -- the first time since 1962 that Chrysler sold fewer than 1 million vehicles. Chrysler is now managed by Italian auto giant Fiat.
Whether December 2009 marks the industry’s turnaround or was simply a good month in a bad year remains to be seen. Some believe that growing environmental awareness and a greater sense of frugality among U.S. consumers will continue to be a drag on auto sales.
Lester Brown, president of Earth Policy Institute, noted that the scrappage rate for old vehicles is creeping up, which he said was a reflection of declining interest in cars -- particularly among younger people in big cities.
“America’s century-old love affair with the automobile may be coming to an end,” he said.
Industry analysts counter that an improving economy and an aging fleet of cars will combine to bolster sales this year. The median age of a car rose to 9.4 years in 2008 from 8.3 in 2000, according to auto research firm R.L. Polk & Co.
On top of that, with discounts and incentives, the price gap between new cars and late-model used cars has been narrowing.
“These kinds of price increases in the used market could cause some consumers to purchase a new car instead of used,” said Ivan Drury, an Edmunds.com analyst.
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