Analysts: Consumer confidence drives auto sales to pre-recession levels

ou helped the U.S. auto industry to its best July sales in seven years, according to industry experts and analysts. Well, you or someone like you. Automakers, including the Detroit Three, Thursday reported industry sales increased 14 percent in July compared to a year ago thanks heavily to retail customers.

DETROIT- You helped the U.S. auto industry to its best July sales in seven years, according to industry experts and analysts.

Well, you or someone like you.

Automakers, including the Detroit Three, Thursday reported industry sales increased 14 percent in July compared to a year ago thanks heavily to retail customers.

Edmunds.com predicts retail sales came in at about 86 percent in July, as some automakers that have traditionally relied heavily on fleet sales to businesses and government saw more consumers returning to the showrooms.

“The strong retail number is an encouraging sign for auto sales,” said Jessica Caldwell, Edmunds.com senior analyst. “Regular people are driving the market rather than an increase in local car sales or fleet customers who may be purchasing large quantities of cars, but not necessarily a reflection of what is happening in terms of customer confidence.”

For example, both Ford Motor Co. and General Motors Co. reported significant drops in fleet sales compared to a year ago. Ford reported fleet sales represented 22 percent, or about 42,600 vehicles, of its total sales – a 5 percentage point decrease compared to July 2012. GM reported fleet customers last month represented 19.2 percent, or about 44,500 cars and trucks – a 4.5 percentage point decrease compared to a year ago.

In this combo made with file photos, logos for General Motors and Ford are shown.AP Photos

Analysts say while fleet sales, which are vehicles sold in bulk to government and businesses, are traditionally good for maintaining or increasing sales for automakers, they don’t represent the true car market and hurt residual values.

“Continuing its strong momentum in July, retail sales continue to give the industry its much needed boost for 2013, proving that car shoppers are ready to return to market,” said Jared Rowe, president for Kelley Blue Book. “Some of the industry’s major players also are seeing double-digit growth from increased consumer demand, with some reporting record sales not seen since before the recession.”

The majority of major automakers in the U.S., including the Detroit Three, reported double-digit sales gains last month compared to a year ago.

With sales up 16 percent compared to a year ago, General Motors Co. led crosstown rivals Ford Motor Co. and Chrysler Group LLC last month, which both reported 11 percent sales increases. 

Combined, the Detroit Three sold 567,888 cars and trucks last month – a 13 percent increase compared to July 2012.

The overall industry came in at 1.32 million vehicles sold in July, according to Autodata Corp. On an annualized basis, the sales pace slowed slightly from June to 15.7 million, which analyst report is the second highest since 2007 – the last time sales topped 16 million.

For months, officials have said record-low interest rates, pent-up demand and economic signs of a recovery continue to lead consumers into dealerships with no signs of slowing down. Many industry experts at the beginning of the year expected sales to come in at about 15.5 million vehicles. However, the majority now expect sales to total 15.5-16 million.

2014 Chevrolet Silverado LTZGM

 “The real story here is the health of the industry and the fact that it’s growing in two extreme segments – small cars on the one hand, large trucks on the other,” said TrueCar.com senior analyst Jesse Toprak. “Pretty much every category has been pretty healthy, but those two stand out quite a bit.”

Full-size pickups, according to Ford, came in at about 12 percent in July. Pickups – particularly for the Detroit Three – are extremely important in terms of profitability and sales.

Small car sales have represented about 21.5 percent of all sales through July, according to Edmunds.com. And while small cars traditionally do well in the summer, before tapering off in the fall and winter, some analysts are predicting them to stay somewhat healthy.

Toprak said there will definitely be some seasonality, but consumers are now buying small cars because they want to, not because it’s the only thing they can afford.

“The nature of the buyer of small cars has changed – it has changed permanently,” he told MLive Thursday during a phone interview. “Now, the change in styling and the fact that you can pretty much find anything in a luxury car in a small car … it’s enabling consumers who can afford a bigger car to consider a small car.”

On top of the retail sales gains, another good sign for a healthy automotive industry are higher transaction prices.

KBB reports the estimated average transaction price for light vehicles in the U.S. was $31,795 in July 2013, up $148 from last month and up $620 year-over-year.

“Transaction prices also are a key driver in knowing that consumers are not only looking for the right vehicle, but a vehicle that’s highly contented to meet their needs,” said Alec Gutierrez, KBB senior analyst.

Here’s a look on how the largest automakers in the U.S. performed in July 2013 compared to a year ago:

- GM sales increased 16 percent to 234,071.

- Ford (193,715 vehicles sold) and Chrysler (140,102) both reported 11 percent sales gains.

- Toyota's sales rose 17 percent to 193,394.

- Honda, which led all major automakers, said sales jumped 21 percent to 141,439.

- Nissan's sales rose 11 percent to 109,041.

- Hyundai's sales rose 6 percent to 66,005.

- Kia’s sales increased 2 percent to 49,004.

- VW said sales remained primarily flat at 49,083.