Initial signs suggest U.S. car dealers were busy in November, following a previous strong month.
While industry bean-counters are still tallying up the reports flooding in from their U.S. dealers, initial indications are that November was another good month for the U.S. auto industry – but still nowhere near the sort of turnaround that carmakers domestic and foreign ultimately are hoping for.
Overall, if outside analysts have their sources pegged, November sales of new vehicles rose somewhere between 15% and 17%, overall, while the retail side of the market posted particularly strong gains. That’s a segment that observers inside and out watch closely because consumers, rather than fleet buyers, will ultimately drive the long-sought recovery.
“Strength in retail sales has continued past mid-November, revealing a trend toward sustained upward momentum,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “It appears that consumer concern regarding the pace of the recovery may be easing as the industry exhibits gradual improvement.”
A strong showing, once carmakers release their official numbers this week, would be significant, following on top of a solid performance in October, when sales hit their highest level all year. (For a look at October sales, Click Here.)
The recent improvements haven’t come cheap, manufacturers spending heavily on incentives – though that varied from brand to brand. General Motors has been consciously reducing what have often been among the industry’s most lavish givebacks, while Toyota has steadily boosted its incentives in an only marginally successful effort to overcome the damage from its ongoing safety problems.
The data tracking firm Edmunds report overall incentive spending up 2.1% in November when compared to the month before – but down 9% versus November 2009. A year ago, makers were desperately struggling to kick-start the market after the wrap-up of the successful – albeit brief – Cash for Clunkers program.
Edmunds forecasts overall November sales will be up 19%, while Power pegs the increase at a slightly more modest 17%, year-over-year. That would yield an annualized sales rate of 12 million for the month, added Schuster, or 10 million focusing on just the retail side.
December sales will likely be down, at least in terms of raw unit volume, reflecting the fact that consumers traditionally put their money elsewhere in the weeks before Christmas.
How soon the industry can recover to anywhere near the 17-million peaks seen in the middle of the last decade is unclear. And not everyone believes that will be possible in the current, sluggish economic cycle.
While GM’s sales chief, Don Johnson, recently suggested “consumer confidence is stabilizing,” he acknowledged that “a fundamental shift in American (car) buying habits” is underway. (Click Here for more.) As a result, value-oriented motorists may wind up hanging onto their old cars longer and adding fewer vehicles to their household fleet than a decade ago.
But Johnson and other industry leaders also stress that manufacturers have built that into their business plan. One only has to look at the long-troubled Detroit Big Three. GM, in particular, expects to post a multi-billion-dollar profit for 2010, the first time its balance sheet will have been in the black for a full year since 2004. And back then, the industry was posting record volumes.
Cutting costs, reducing debt and eliminating excess capacity have been moves that have helped not just Detroit’s makers but also their import competitors.