Let’s take a closer look at the situation and assess some of the essential numbers.
Numbers at a Glance
Kelley Blue Book, J.D. Power & Associates and LMC Automotive estimate that new vehicles sales should increase 12% to 14% for August against prior year figures. Automakers, particularly the Detroit auto giants, are benefiting the most from the rebound in the housing and construction sector with higher consumer confidence.
According to Kelly, Honda Motors is expected to post its best ever year-on-year sales gain of 17.3%. Solid sales of the redesigned Accord, Civic and CR-V are pulling up the numbers for the automaker. In fact, the Japanese automaker’s market share increased by 0.3% to 10.5% over last year. Toyota, on the other hand, is estimated to witness a sales gain of 13.5% by selling approximately 214,000 vehicles.
Ford Motors is also estimated to post a 9.8% sales gain for the month with 14.8% market share, marginally ahead of Toyota which has a market share of 14.7%. The second largest U.S. automaker’s North American production has gone up 13% in the current year as it had to increase the production of the Escape crossover and Explorer SUV which are in huge demand. Ford suffered in July due to the shortage of inventory of some of its popular models like the Focus and Fusion. General Motors, which continues to be the lead automaker in the U.S. with 18.7% market share, is also suffering from slow fleet sales.
There are several factors that are triggering the sales of the auto giants.
Pent-up demand from the population is one of the leading factors that is boosting auto sales. In fact, the demand is so strong that Detroit automakers, particularly Ford, are experiencing inventory shortage which is dampening sales. Also, the recovery in the housing sector is boosting the demand for trucks and pickups. Trucks and pickups are an area of strength for the Detroit Three. This is one strong reason that is making General motors, Ford and Chrysler post solid numbers with higher margins as pickups are more profitable to sell.
In addition, the return of consumer confidence with improving employment levels and recovering housing sector is also helping the automakers post record numbers. There were 162,000 new jobs added in July which brought the unemployment level down to 7.4%, the best since December 2008.
Moreover, revamped models introduced by auto giants incorporate latest technologies and fabulous specifications which are very difficult to resist. Consumers are now more willing than ever to replace their age-old cars, particularly as credit is also available more easily. Lower interest cost and better repayment tenure is encouraging buyers to walk into the auto showrooms to book their new car.
The Bottom Line
Detroit automakers are experiencing a strong rebound, thanks to the improving housing sector which is bolstering pickup sales. Conventional pickup sales are stronger in the second half of the year. This suggests that the Detroit giants are going to see solid sales in the second half of the year, provided they keep adequate inventory. In all this what remains to be seen is if 2013 auto sales will actually reach the 16 million mark.