Auto Industry: Back to Its Heyday? - Analyst Blog
December 06 2012 - 11:16AM
Zacks
It looks that the auto industry is getting back to its heyday,
last seen before the economic recession. We see the industry
posting multiple-year-high sales for many months in 2012.
November was no exception. Auto sales in the U.S. grew 15% to 1.14
million vehicles, or 15.5 million on a seasonally adjusted annual
rate (SAAR) basis in the month driven by pent-up demand generated
from Hurricane Sandy as well as from the aging vehicles, and
improving macroeconomic conditions. This is the five-year high
sales recorded by the industry since 2007.
There were so many factors from the demand side, which fueled the
sales growth in November. Firstly, the economy shows confidence (as
home prices rise, unemployment reduces and auto financing becomes
easier) barring the dangers of forthcoming “fiscal cliff.”
Secondly, the average age of vehicles has been steadily approaching
11 years and can even go beyond, signaling further possibilities of
growth in sales of new cars. Thirdly, people in the Northeast who
postponed their purchases in October due to Sandy or whose cars
were damaged due to the storm were forced to buy new vehicles in
November.
These factors, along with the buyers’ desire for more advanced
options, lifted the average sales price in the industry to the
highest level in nearly a year. According to TrueCar.com, average
vehicle price in November were $30,832, up 1.1% from last year.
November witnessed a rise in sales for practically all kinds of
vehicles, from trucks to sports utility vehicles (SUVs) and from
sedans to small cars. Honda Motor Co. (HMC),
Toyota Motor Corp. (TM) and Volkswagen
AG (VLKAY) had the biggest sales increases during the
month. Among the Detroit automakers, Chrysler was the winner.
Let's delve into the individual automakers’ sales.
U.S. Automakers
Despite posting a meager 3% growth in sales to 186,505 vehicles,
General Motors Company (GM) saw its best November
since 2007. Thanks to the double-digit growth in sales for its
Buick and Cadillac brands. But GM was not gratified with the low
sales growth, as it has a smaller exposure in the Sandy-hit regions
compared to its rivals and its competitors such as Chrysler, Nissan
Motors Co. (NSANY) and Ford Motor Co. (F) resorted
to aggressive incentives to boost sales.
Ford’s sales grew 6.5% to 177,673 vehicles, driven by impressive
sales growth of small compact Ford Focus (56%) and pickup truck
F-Series (18%). Most notably, the company’s small-car sales shot up
76% from November last year. Due to the encouraging sales reports
during the year, the company is looking forward to boost its
production in 2013.
Chrysler Group -- controlled by Italy’s Fiat SpA
(FIATY) -- came up with its five-year high sales of 122,565
vehicles during the month. The 14% rise in sales was mainly
attributable to its Dodge brand, which saw a 32% growth during the
month. Most notably, Dodge Journey crossover SUV sales jumped 77%
in the month.
Japanese Automakers
the long-time battle with safety-related issues seems to have had
had very little impact on the sales for Toyota. The automaker’s
sales zoomed 17.2% to 161,695 vehicles, driven by burgeoning demand
for its Corolla and Camry sedans and Scion small cars. The Camry
mid-size was the top-selling vehicle during the month, registering
a 22.7% sales growth.
Honda Motor recorded a handsome 38.9% jump in sales to 116,580
vehicles buoyed by sales increases of Accord (83%), Civic (76%) and
CR-V (36%). The company’s car sales surged 61% while its truck
sales rose 18% during the month.
Nissan Motors witnessed a 12.9% growth in sales to 96,197 vehicles
driven by considerable rise in truck sales in both the namesake
(23.4%) and Infiniti (109.2%) divisions. Nissan division sales went
up 9.8% to 84,300 units, driven mainly by commendable sales of its
new Pathfinder SUV. Meanwhile, Infiniti saw its best November since
1989 driven by crossovers and SUVs.
Other Automakers
Daimler AG’s (DDAIF) Mercedes-Benz reported a 13.1% rise
in sales to 30,315 vehicles in the U.S. The growth was mainly
attributable to a 59% increase in sales of its E-Class sedans. The
company’s sales were largely benefited from the Sandy-hit regions,
which comprise a quarter of its sales.
Volkswagen rocked posting its best November sales since 1973. The
company’s sales notched up 29.3% to 36,728 vehicles, driven by
impressive sales of Passat mid-size car and Tiguan SUV. Sales in
the Sandy-hit regions strongly influenced the company’s overall
sales.
Hyundai Motor Co. (HYMLF) and its affiliate Kia
Motors Corp did exceptionally well in November despite their battle
with the U.S. Environmental Protection Agency regarding its false
advertising scandal about fuel efficiency in some models. Hyundai’s
sales rose 8% to 53,487 cars while Kia’s sales escalated 10.9% to
41,055 cars. However, only 10% of Hyundai’s U.S. customers were
aware of the scandal despite the publicity, according to a
study.
Is the Worst Over?
2012 is definitely going to end on a higher note. McNeil, GM’s vice
president of U.S. sales operations, stated that industry sales will
reach the upper-end of its forecasted range of 14 million–14.5
million units (on a SAAR basis) driven by the growth drivers such
as pent-up demand and improved consumer confidence. With this, 2012
would be a remarkable year since 2007 when industry sales clocked
at 16.1 million units (on a SAAR basis).
Despite relentless optimism, the looming consequences of impending
“fiscal cliff” are difficult to avoid. Most say that a sharp
reduction in federal spending and rise in taxes could possibly tip
the economy back into recession unless Congress and the White House
reach a deal to cut the budget deficit. As a result, many
automakers stayed away from making any 2013 projection.
Whatever the authorities decide to resolve the fiasco, we expect an
uptrend as automakers brace themselves for the worst and further
focuses on all the bright spots the industry has experienced so far
this year.
DAIMLER AG (DDAIF): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
FIAT SPA (FIATY): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
HONDA MOTOR (HMC): Free Stock Analysis Report
(HYMLF): ETF Research Reports
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
(VLKAY): ETF Research Reports
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