December 2009 Sales Increase Likely

When the December selling period for US car sales comes to a close on January 4, 2010, there should be some good news to report. In fact, if J.D. Power and Associates projections are correct, a 7 percent month over month gain is possible. The company is a global marketing information services business whose services include market research, customer satisfaction, and forecasting.

Cash For Clunkers

Keep in mind that December 2008 was one of the worst months for car sales over the past few years. Sales cratered as the full brunt of the recession was being felt with consumers clamping their wallets and pocketbooks shut. For most of 2009 sales were truly abysmal, but they began to pick up again following the summer’s CARS or cash for clunkers program.

“The market is continuing to improve, with the relative strength of December sales supporting a year-end rally,” said Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates. “The December selling rate is tracking at 11.2 million units-up nearly 1 million units from one year ago-which sets up 2010 for further recovery.”

If these prediction ring true then December could be the turning point that automakers have been seeking. Sales began to dip in late 2007 and continued to drop off in 2008, before collapsing following the financial crisis of September 2008. Most analysts believe that the low point was reached in March 2009, with a gradual recovery beginning soon thereafter.

A Brighter 2010

Total sales should hit 10.4 million units for the year, with 8.7 million units being retail sales. The difference, of course, is fleet sales. For 2011, J.D. Power and Associates believes automakers will sell 11.5 million units, a far cry from the 17 million units sold earlier this decade, but a market improvement over 2008 and 2009.

Importantly, automakers are learning how to turn a profit with fewer vehicles sold by reducing incentives and upping content. That can help sustain automakers in the years ahead as consumers carefully weigh jumping back into the market.

Source: J.D. Power and Associates

Photo Credit: Chrysler Group, LLC

The Last of the Clunkers!

I am so glad that the federal government’s Cash Allowance Rebate System (CARS) program is over. Not because I didn’t think it was a good idea (I have mixed thoughts about that), rather the program has dominated the automotive news for the past month.

Let’s Hear For the MKT!

Now that CARS has finally been laid to rest, let’s hear it for several new models waiting in the wings including the Lincoln MKT as well as all of the bright and beautiful cars that will be making their world debut at the Frankfurt Motor Show in Germany later this month.

I promise that I won’t be writing about CARS again unless I must make a point about a particular make or model. But the most significant thing about Cash For Clunkers is that it came in under budget. Yes, a government program that actually spent less than what had been announced — that’s news in and of itself!

Quickly Depleted and Replenished

Launched in July, the initial program quickly ran out of money requiring Congress to seek additional funding to raise the one billion dollar taxpayer backing up to three billion. I believe the program would have eclipsed the three billion dollar mark had some quick thinking dealers not pulled the plug on their programs early.

As the last weekend approached several dealerships, including Auto Nation, exited the program early. They wanted to make sure that they got paid and that all of their paperwork was processed on time. That was wise because the federal government gave everyone until 8 pm on August 24th to get their paperwork in, extending it by 24 hours when it became apparent that backlogs were keeping dealers from finishing up on time.

Lots of Trucks Traded In

According to The Detroit News, nearly 700,000 cars were scrapped because of CARS.   $2.877 billion will end up helping consumers while related administrative costs drove the final expense up to $2.977 billion. Notably, 84% of the vehicles turned in were truck based (SUVs, trucks, minivans) with consumers choosing to replace these vehicles with passenger cars 59% of the time.

The top selling model was the Toyota Corolla, followed by the Honda Civic and Toyota Camry. Only two US models made the list — the Ford Focus (#4) and the Ford Escape (#10). Honda and Toyota each were represented by three cars on the Top Ten list.

Interestingly, the domestic models were the most traded in vehicles with Ford, GM and Chrysler dominating the Top Ten trade in list.

Source: The Detroit News