Despite shaky consumer confidence, high unemployment and a rocky stock market, the auto industry somehow keeps rolling along.
Automakers sold almost 1.1 million vehicles in September, up 10% from the same month a year earlier and a 2% increase from August. That translates to an annual sales rate of more than 13 million, the best since April.
It was one of the few bright spots in an otherwise dismal month for the nation’s economy.
“That’s the kind of stronger number we would definitely like to see,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics. “Consumer spending has been flat since late spring, and a jump of a million units in auto sales suggests some growth, and that would be positive for keeping the economy out of recession.”
Consumers are heading to dealerships to replace aging cars. The industry estimates that the average age of vehicles on the road is approaching 11 years as people have delayed purchases because of the recession and more recently an uncertain economy.
“We have pent-up demand. Consumers want to replace the cars. If we get just a little better job growth a number like this could be sustainable,” Hoyt said.
Low interest rates also are bolstering the market.
“The lower cost of funds to manufacturers and the institutions makes it less expensive to offer those types of promotions,” said Don Johnson, General Motors Co.'s vice president of U.S. sales operations.
Toyota Motor Corp., for example, isn’t charging interest on loans for purchases of seven of its 2011 vehicles, including the popular Camry, Sienna minivan and RAV4 sport utility vehicle.
“Most consumers like to minimize their monthly payment,” said Bob Carter, Toyota division group vice president and general manager. Zero-percent or low-interest rates “are the most successful way to get an attractive payment.”
Despite the rosy sales picture in September, not every economist agrees that the auto sector will represent a pillar of economic support in the coming months.
“I am skeptical that [auto sales] would stay that high through the holiday season given how bad the job market is and given declining household incomes and really weak consumer confidence and consumer expectations,” said Ken Goldstein, senior economist with the Conference Board.
Domestic automakers had a strong month. Chrysler Group led the pack with U.S. sales up 27% from a year earlier. GM sales rose 20% and Ford Motor Co. increased 9%.
South Korean automakers Hyundai Motor America and Kia Motors America also did well, with sales rising 12% and 18%, respectively.
However, Toyota and Honda Motor Co. continued to struggle. Sales were hobbled by car shortages resulting from the March earthquake and tsunami in Japan, which disrupted factory production overseas and in North America.
Toyota’s sales dropped 18%. Honda sales fell 8%.
Both automakers said they have resumed full production and expect to rebound in October.
“In September, production in both North America and Japan returned to normal levels for the first time since the March 11 earthquake and tsunami,” Carter said. “Our plants are now working overtime and dealer deliveries will continue to increase through the remainder of 2011.”
Of the major Japanese auto companies, Nissan North America bucked the trend. Its sales rose 25% in September.