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Automakers gain speed at year end as U.S. shoppers return

The U.S. auto industry is seeing demand recover faster than anticipated, with  automakers 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. 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, Mich.-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.

Older cars

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 conference call  last week.

“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 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.

Broad demand

Consumer demand was broad-based, as Toyota and Honda boosted deliveries of  smaller vehicles, making up for production lost after March 11’s tsunami and  earthquake in Japan 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 automaker’s top-selling model.  Among luxury brands, Daimler AG’s November deliveries jumped 47 percent, as the  brand’s year-to-date sales closed to within 1,600 of Bayerische Motoren Werke  AG’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 pace

Industry sales accelerated to a 13.6 million seasonally adjusted annualized  rate, according to Woodcliff 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,” said Paul Ballew, chief economist for Nationwide Mutual Insurance Co.  “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.

Considering increases

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.

 

Originally posted on Automotive News, December 5th

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