Ahead of the Bell: August auto sales
DETROIT (AP) — U.S. auto sales were so strong in August that it may have been the best month since May of 2007, when $3 a gallon gasoline set off panic buying of fuel-thrifty vehicles.
LMC Automotive, an industry consulting firm, is predicting that sales last month were close to 1.5 million, about 12 percent higher than a year ago and the highest total in more than six years. The major auto companies report U.S. sales figures for August on Wednesday.
This time, small cars aren't the only thing that's selling. Analysts say people are buying everything from tiny Honda Fits to big Chevrolet pickup trucks as an improving economy keeps pushing auto sales higher.
Some consumers still find gas prices steep enough that they're buying small cars. Plus, these vehicles are nicer than they were six years ago, far quieter and safer with more features, said Tom Libby, lead North American analyst for the Polk automotive research firm. In fact, compact and subcompact cars could challenge midsize cars as the largest segment in the U.S., according to analysts from Kelley Blue Book.
Still, gas prices aren't the catalyst they were back in 2007 and 2008. In fact, gas this August was the cheapest in three years, averaging $3.57 a gallon, compared with $3.62 in 2011 and $3.69 last year.
In May of 2007, automakers sold more than 1.56 million cars and trucks, due largely to a boom in small cars as that nationwide average for gas topped $3 a gallon for the first time. That helped the Japanese automakers. Sales of Toyota's Prius gas-electric hybrid, which then got 46 miles per gallon in city and highway driving, nearly tripled.
But last month, Toyota had to discount the Prius to boost sales. Toyota discounted the average Prius by $1,462, more than triple the incentives from a year ago, according to TrueCar.com, an auto pricing website.
"Consumers like stability," said Jeff Schuster, senior vice president of sales forecasting for LMC. Now that they're used to higher gas prices, "it's less of a shock than in May of 2007," he said.
Libby also points out that automakers have made all of their cars and trucks more fuel efficient over the past six years. They're facing a government requirement to double fuel efficiency to an average of 54.5 miles per gallon by 2025. The increased fuel efficiency has eased the pain at the pump and made new cars more appealing, Libby said.
And others who need new trucks and large vehicles for towing or work up are buying what they need as the economy picks.
Truck sales are rising faster than the rest of the market as the housing industry, which uses thousands of work trucks, continues its recovery from the Great Recession, analysts say. Plus, the average truck on the road today is 11.3 years old, and owners are being forced to replace them.
Trucks also are more fuel efficient than they were six years ago, making them an easier buy when gas prices are high, said Christian Mayes, an auto analyst with Edward Jones in St. Louis. A Chevrolet Silverado with a V8 engine and automatic transmission, for instance, now gets 23 mpg on the highway, up from 19 in a comparable 2007 truck.
"There's a lot the automakers are doing in terms of making those vehicles lighter," said Mayes.
Of all automakers, Honda and Nissan are expected to post the biggest gains in August, according to Kelley Blue Book. Honda sales should rise more than 17 percent for the month, while Nissan's should be up almost 15.