Off to a fast start in 2011, the U.S. car market.
Picking up where already-solid December sales left off, things are looking good for January to continue the momentum of the automotive recovery, industry analysts suggest, one key observer noting that demand is running “ahead of expectations.”
So far, the ongoing run-up in fuel prices – which have now pushed the price of a gallon of gas to more than $3 in most of the country—doesn’t seem to be short-circuiting market momentum, observers indicate, though a further, sharp increase could still send things into a downward spiral.
If mid-month sales trends continue to hold, the U.S. auto market will show a 23% year-over-year gain for January 2011, forecasts the California-based market research firm, J.D. Power and Associates. The industry, the firm reports, is “starting the year ahead of expectations,” with an annualized sales rate approaching 12 million – about 2 million ahead of January 2010 sales levels.
Significantly, “Buyers have returned to the showrooms without the crutch of high incentives,” said Jeff Schuster, Power’s executive director of global forecasting. “This signals stability and strength of natural demand.”
The research firm, Edmunds, is even more upbeat, CEO Jeremy Anwyl reporting January sales trends are “very strong,” and on track for an annualized sales rate of 12.8 million.
That would be slightly ahead of Decembers sales volume and suggests that motorists are continuing to feel confident about the economy and not particularly put off by the impact, so far, of the fuel price run-up. However Anwyl expressed concern that fuel prices could turn into a more serious factor in the near future, especially in the light truck market.
How far pump prices might climb is anything but certain. The weak economy might, in the past, have held the numbers down by restricting demand. But even though American motorists did, indeed, use significantly less gasoline in 2010 than when demand peaked, in 2006, prices have proven more resistant to downward pressure. One key reason is the growth of demand in emerging markets, such as India and China, the latter now the world’s largest national automotive market.
(Chinese car sales could top 20 million in 2011. For that story, Click Here.)
Based on the apparent momentum of the American market, Power has upped its 2011 retail sales forecast from 10.4 million to 10.5 million. Adding in fleets, which currently account for 20% of U.S. light-vehicle volumes, total sales for 2011, should reach 13.0 million the research firm predicts, up from the previous Power forecast of 12.8 million.
“Optimism is increasing for the auto industry following a stronger outlook for the economy,” said Schuster. And, if anything, he adds, as the economy strengthens, “further upside potential remains.”
There’s good news for automakers and their workers, according to Power, the firm anticipating production at North American assembly plants will continue to ramp up. General Motors, for example, planning to add hundreds of new workers at a suburban Detroit plant producing its subcompact Sonic, while also looking for ways to boost projected production of the Chevrolet Volt plug-in hybrid from 10,000 to 25,000 or more during 2011.
For all of 2011, Power projects makers will build 12.6 million cars, trucks and crossovers in North America, a 7% gain over 2010.