The sales numbers from October have given carmakers a renewed sense of confidence that sales will remain strong in the months to come as consumers continue to buy more trucks, utilities and luxury vehicles.
A long string of carmakers reported increased sales during October among them Subaru, Chrysler Group, Audi, Nissan, Mercedes-Benz, BMW, Toyota, Acura, Honda, Hyundai, Volkswagen, Kia and GM all reported sales increases for last month.
“October vehicle sales were the best for the month in 10 years as an improving economy and lower gas prices drove strong SUV sales,” noted Bill Fay, Toyota division group vice president and general manager, who has said that the sale outlook for 2015 is also looks positive.
“The momentum is still with us as shown by back-to-back monthly records for BMW in October and September,” said Ludwig Willisch, president and CEO, BMW of North America, which reported an 11% sales increase.
Acura reported a 7.9% increase in sales and Subaru, which is on its way to its best year in history, reported a 25% increase in new vehicle sales for October.
To date, 2014 has produced eight of the ten best sales months in the history of Audi of America. Through October, Audi U.S. sales already stand as the second-best year for the brand on record. Audi set an annual record of 158,061 vehicles sold in 2013, topping the previous record of 139,310 vehicles sold in 2012.
“We can confidently predict that 2014 will end as the fifth-consecutive record year for Audi sales in the U.S.,” said Mark Del Rosso, executive vice president and chief operating officer, Audi of America.
Consumer confidence, a key element in car sales, also has climbed to it highest level since the recession.
Among the major brands, only Ford, where executives insists they are following a well-conceived plan to launch the new F150 pickup truck, continues to lose ground as its sales dropped 2% in October.
Eric Lyman, vice president of industry insights for TrueCar, said if anything new vehicle sales were actually better than expected during October and he expects automakers to pull out all the stops as the close out the years.
“We’re continuing to see success with the trucks and utility vehicles, Lyman said. At the same time, transaction prices have edged up while incentives have come down across the industry, leaving carmakers in a much strong position.
Some executives, notably Honda’s John Mendel, had expressed concern recently about incentive levels moving up. But the sales-to-incentive ratio has actually improved so incentives only account for 7.6% of the average transaction price, which is lower than the 9.3% that prevailed at the end of the summer.
(Low gas prices keep sales rolling in October. Click Here to see the report.)
“With a higher mix, consumers are obviously feeling more confident and mix tilted to more expensive vehicles,” Mendel said, which means carmakers are taking home a larger profit on every vehicle they sell.
December tends to be a good month for automakers due to year-end sales events, making it a good time to purchase new vehicle in the minds of many consumers.
With gasoline dropping below $3 per gallon in some parts of the country, Thomas King, J.D. Power vice president, also said the falling price of fuel has helped stabilize the sales of full-size trucks.
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“As large pickup owners experience these low fuel prices each time they fill their tank, fewer of them are defecting from the segment. While fuel prices are important, they are just one driver of consumer behavior, with factors such as incentives and product availability also influencing defection patterns.”
The estimated average transaction price for light vehicles in the United States was $33,361 in October 2014. New car prices have increased by $246 or 0.6% from October 2013, while rising $185 (0.7%) from last month.
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“October was another strong month for the automotive sector, driven by a combination of low fuel prices, available credit and the ongoing pent-up demand factor,” said Karl Brauer, senior analyst for Kelley Blue Book. “The average car on the road remains more than 11-years-old, even with the growth of new-car sales during the past three years. What’s changed in recent months is the drop in fuel prices, leading to higher average transaction prices from increased large truck and SUV sales.
“This is great news for automakers, as these vehicles offer increased profit versus small and mid-size cars, though it also creates the potential for buyers’ remorse if the price of gas rises suddenly. We saw that in the mid-2000s when fuel prices spiked, leading to a glut of large vehicles on dealer lots and reduced residual values that hampered industry growth. Hopefully history won’t repeat itself.”
A friend from Europe visited the eastern U.S. in August and commented that the U.S. has basically abandoned the traditional U.S. brand passenger car. His take was that except for a small percentage of Asian import cars most everyone in the U.S. that he observed was driving a pick-up truck, SUV or Crossover. To a point he was correct though we all understand that there are certainly millions of U.S. brand passenger autos sold here annually.