Pent-up demand fuels big February auto sales boost
March 2, 2012
Pent-up demand fuels big February auto sales boost
By BRYCE G. HOFFMAN, CHRISTINE TIERNEY, MELISSA BURDEN AND JACLYN TROP / The Detroit News
February was the strongest month for new car and truck sales in four years, as signs of a strengthening economy convinced consumers the time was finally right to trade in their old vehicles.
And with gasoline prices surging, many opted for more fuel-efficient models.
Overall industry sales were up 15.7 percent last month on volume of nearly 1.15 million units. That translated into a seasonally adjusted annualized selling rate of 15.1 million units — the highest since February 2008, just before the collapse of the U.S. housing market brought an end to easy credit and sent the automobile industry into a nosedive.
Ever since the end of the Great Recession, analysts have been talking about pent-up demand for new vehicles. But consumers have remained cautious as unemployment stayed stubbornly high and lenders shied away from borrowers with less-than-perfect credit. As a result, the age of the average automobile on the American road reached 11 years, the oldest on record.
But in February, everything seemed to take one step in the right direction. There were hints the American economy really was on the mend. Credit became a little easier to obtain. And consumers were ready.
“There’s been a lot of good economic news,” said analyst Jessica Caldwell of Edmunds.com, who also credited the unusually mild weather for getting customers onto dealer lots in February. “It’s really starting to look like the needle is moving.”
Chrysler Group LLC once again reported the biggest gain of any full-line manufacturer. The Auburn Hills automaker sold 133,521 cars and trucks last month, up a whopping 40.4 percent over February 2011. That allowed Chrysler to gain two points of share, as its slice of the U.S. market soared to 11.6 percent from 9.6 percent a year ago.
The Chrysler brand itself posted a 113.9 percent sales increase, led by vehicles such as the Chrysler 200 sedan.
Reid Bigland, the company’s U.S. sales chief, said Chrysler was able to take advantage of the demand for more fuel-efficient cars like never before.
“Our product portfolio now contains some of the most fuel-efficient vehicles in our company’s history,” he said in a statement.
“A few years ago, higher fuel prices were a major threat to our total vehicle sales, whereas today those higher prices have become far less of an issue. We now have 13 vehicles with an EPA-rated highway fuel economy of 25 miles per gallon or higher, and six of those vehicles get 31 mpg or higher.”
But Caldwell and other analysts said Chrysler was also helped by big fleet orders in February.
Gas prices impact sales
Ford Motor Co. was also a beneficiary of rising gasoline prices as consumers flocked to its economical Focus compact and EcoBoost equipped F-150 pickups, which use less gas than rival models.
Ford sold 178,644 vehicles in February — up 14.3 percent year-over-year. But that was slightly less than the industry as a whole gained, so the Dearborn automaker’s share of the U.S. market slipped from 15.7 percent to 15.5 percent.
Ford senior U.S. economist Jenny Lin said gasoline prices definitely affected consumer buying habits in February, noting the current national average of $3.70 per gallon is 35 cents more than it was this time last year.
“We saw consumers continue as the month progressed to move towards these smaller vehicles, (to) more fuel-efficient offerings, and the Focus is a reflection of that,” said Ford sales analyst Erich Merkle. “Focus sales were up 115 percent.”
General Motors Co. saw its share of the market slide even more.
GM, which said it pulled back on incentives in February, only managed a 1.1 percent sales gain on volume of 209,306 units. Its share of the market dropped from 20.8 percent in February of 2011 to just 18.2 percent.
Cadillac and Buick sales were both down year-over-year, but sales of more fuel-efficient cars such as the Chevrolet Cruze and Sonic were up sharply, underscoring the increased demand for smaller vehicles. Total GM small and compact car sales were up 43 percent year-over-year.
“Last February was the best February we had on record,” said Kurt McNeil, vice president of Cadillac sales, who noted that the company has new products such as the ATS launching shortly. “The immediate future is really bright.”
One of the companies claiming some of GM’s lost share was Volkswagen AG, which saw its sales surge to 39,273 units in February — a gain of 33.9 percent. That translated into a 3.4 percent share of the U.S. market.
“If you look at consumer confidence, you’ve got a generally improving situation,” said Jonathan Browning, chief executive of Volkswagen Group of America.
Toyota Motor Corp. posted a 12.4 percent sales gain in February on volume of 159,423 units, but its share of the market slipped to 13.9 percent from 14.3 percent a year ago.
“The economy’s getting better, job reports are getting better, consumer confidence is getting better,” said Bob Carter, general manager of U.S. Toyota-brand sales. “You can add the weather to that optimism also.”
Honda Motor Co. saw its sales increase 12.3 percent to 110,157 units, while Nissan Motor Co. reported a 15.5 percent increase with sales of 106,731 vehicles.
Analysts noted that Nissan offered some of its biggest incentives ever, bucking the prevailing industry trend that saw incentives down and transaction prices up. That means, for most automakers, February’s sales gain should make a real contribution to the bottom line.