Auto Sales in U.S. Riding High

Auto Sales in US riding high

U.S. automakers are reporting some of the highest auto sales in the last nine years. New car sales for the month of May exceeded 1.6 million units, to help underscore the recovering economy, along with growing consumer demand. The auto sales are the strongest seen since before the recession of 2008, and was achieved without increasing discount incentives.

The expectations all exceeded by the top seven automakers, and several companies recorded sales. GM and Chrysler reported the best sales in May from the last seven years, while both Nissan and Hyundai Motor Companies had record months, while Toyota and Ford beat the forecasts.

The record number of sales did not seem to be affected by the recall of GM vehicles, as the company noted an increase of 12.6 percent, which was above the expected consensus of nine percent.  The gains were observed across all four of the corporation’s brands with strong demands for pick-up trucks and utility vehicles. The sales of the Chevrolet brands increased by 14 percent with the units of Impala, Malibu, Camaro, redesigned Corvette,  Spark, Silverado, and Equinox performing well, along with stronger sales from  both Cadillac and Buick.

It appears that the company is defying logic, with increasingly robust sales, despite reports of a dismal economy, and lagging consumer confidence, along with a record number of recalls.  The sales seem to surprise the market, in light of the massive recalls due to faulty ignition switches that resulted in 13 deaths. The blame for the issues had been attributed to the previous GM that existed before the company emerged from bankruptcy with the Federal bailout. The company still faces a massive concentration of lawsuits and remains under investigation by the U.S. government.

The first in the series of recalls was announced in February, when 2.6 million units of the Cobalt and compact brands were recalled. The resulting scrutiny resulted in an overhaul of the internal manufacturing processes, which further accelerated a deluge of recalls. So far, this year, 30 recalls have been issued to repair more than 16 million vehicles, and the company has prepared to take charge of more than $1.7 billion to pay for the repairs.  The total cost of the recall is not yet known, but fines and settlements of the lawsuits can be expected to be much higher.

Auto sales in US riding high The monthly auto sales appear to have been increasing over the last three months, as demand for big-ticket items continues to rise.  The demand has also been attributed to the sunny weather of the last five weekends, and May has traditionally been a strong month for auto sales, as buyers receive tax returns and prepare for summer road trips.

However, sales of the Ford’s best-selling F-series trucks declined, as the automaker cut discounts to prepare for the launch of the redesigned F-150, which was revealed at the Detroit auto show. The body of the new F-150 is made almost entirely with aluminum, resulting in a dramatic weight reduction.

The average price for new vehicles was approximately $32,300, which according to the Kelley Blue Book research is an increase of $650 from a year ago, although it lower than the previous month of April.

Industry experts and analysts are expecting the record auto sales to move ahead, as several other factors such as maintaining low interest rates, and new features on vehicles along with generous lease terms continue to attract customers to the showrooms.

By Dale Davidson

Sources:
WP
Valuewalk
Businessweek
Reuters

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