Foreign firms got most out of ‘clunkers’
Hailed as a jump-start for the U.S. economy, the federal government’s “cash for clunkers” gave the biggest boost to foreign automakers.
Overall, auto sales in August were the highest in more than a year, according to industry figures released Tuesday. Carmakers sold more than 1.2 million cars and trucks, up 1% from the same month last year and the first year-over-year sales gain since August 2007.
Much of that was a result of the clunkers program, which ran July 24 to Aug. 24 and provided hefty government rebates to consumers who traded in gas guzzlers for more fuel-efficient new vehicles.
Foreign automakers dominated the trade, accounting for 61.4% of the nearly 700,000 vehicles sold under the program. Japanese makers grabbed the biggest share, with 47% of the total, thanks to popular gas sippers such as the Toyota Prius and the Honda Fit.
But it was the scrappy South Koreans that provided the biggest sales surprise.
Hyundai, which has worked to make up ground against bigger rivals this year with innovative marketing programs and new model offerings, reported an eye-popping 47% increase in August sales. Corporate cousin Kia reported a 60% jump.
Thirteen of Hyundai’s 16 models qualified for the program, which helped it sell 49,600 vehicles in the clunkers initiative, or 7.2% of all program sales, according to government figures. That was much more than Hyundai’s first-half U.S. market share of 4.3% and helped it creep closer to the three U.S. and three Japanese automakers that rule U.S. showrooms. Last month Hyundai sold almost 60,500 cars.
The company did it with the help of aggressive marketing tied to the recession, its early embrace of the clunkers program and favorable publicity from a string of awards from auto critics. Analysts said the strong showing, coming in one of the auto industry’s bleakest periods, could turn out to be Hyundai’s big break in the U.S. market.
“We used to call them the Big Six, but now all of our files say ‘the Big Seven,’ ” said Jesse Toprak, vice president of industry trends at auto website TrueCar. “We’ve added Hyundai.”
Ford Motor Co., the No. 2 U.S. carmaker, reported a 17% rise in August sales compared with a year ago, the second straight month the automaker has reported higher sales.
“Back-to-back sales increases has a nice ring to it,” Ford sales analyst George Pipas said in a conference call.
Chrysler Group and General Motors Co. didn’t fare as well.
Chrysler, with few gas sippers in its lineup and short on inventory because of factory shutdowns, reported a 15.4% drop in sales and slid to sixth place in U.S. sales, behind Nissan Motor Co.
GM, which finished second to Toyota Motor Corp. in clunker sales, suffered a 20% sales decline. GM executives, however, described August as an “excellent” month, saying the automaker maintained its share of the U.S. market and noted that it faced a tough comparison with August 2008, when sales were juiced to their highest level of the year by special pricing tied to the company’s 100th anniversary.
And GM said it, too, benefited from the clunker program’s emphasis on fuel economy. For instance, sales of GM’s compact cars such as the Chevrolet Cobalt, which had averaged around 10,000 a month during the first half of the year, jumped to 22,000 in August.
It was the Asian companies, which rely more heavily on the smaller fuel-efficient vehicles that drove clunker sales, that clearly reaped the biggest gains. Still, U.S. workers, car dealerships and communities benefited. For instance, many of the hottest-selling Japanese cars, such as the Toyota Camry and Civic, are built in the U.S. And car dealerships are some of the nation’s biggest generators of sales tax receipts.
Toyota, which captured the largest percentage of clunker sales at 19.4%, said it sold 225,088 vehicles in August, up 6.4% from a year earlier. It was the Japanese automaker’s best sales month since May 2008 as buyers snapped up Corollas, Priuses and RAV-4 SUVs.
And Honda Motor Co., riding the strong sales of its fuel-efficient Civic and Fit compacts, notched a 9.9% gain in August sales compared with a year earlier.
Hyundai, looking for a way out of the sales rut it was stuck in for several years in the U.S., decided to focus on grabbing the attention of recession-weary car buyers.
It drew a lot of attention in January with its Hyundai Assurance Program, which allowed buyers to return a car in 12 months if they lost their job.
And when clunkers came along, Hyundai dived in early, telling dealers it would honor clunker sales even before the government published the reimbursement rules for the program.
The tough economic times and the lure of government rebates gave Hyundai an opening similar to the one exploited by Japanese carmakers in the late 1970s and early 1980s, when gas prices skyrocketed and U.S. cars were criticized for shoddy workmanship.
“We see this as a launching pad for us,” said Dave Zuchowski, vice president of sales for Fountain Valley-based Hyundai Motor America.
The string of quality and design awards the company picked up this year, including North American Car of the Year at the Detroit auto show, didn’t hurt either.
“Now, you don’t have to go home and explain to your neighbor why you bought a Sonata instead of an Accord or a Camry,” Zuchowski said.
On the downside, analysts note that Hyundai and Kia have relied heavily on incentives to move cars.
Whether the momentum lasts is a question Hyundai -- and many automakers -- are asking. Was the August sales surge a temporary, clunker-induced reprieve from almost two years of grief? Some auto dealers are already reporting a big drop-off in foot traffic into their showrooms since the program expired.
None of the automakers seems to think the 14 million annual sales rate implied by the month’s results is a realistic indicator of the industry’s health. But many see signs of a turnaround.
To cite one example: Ford said it sold more Ranger and F-150 pickup trucks, which posted year-over-year sales increases of 57% and 13%, respectively. Pickup sales are considered a positive sign for the construction industry because many of them are purchased by contractors.
“We’ll see some drop-off in September,” said Bob Carter, general manager of Toyota’s U.S. sales division.
“But we’re starting to see concrete signs of automotive recovery moving into the fourth quarter.”
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