The housing market is still on shaky ground. Unemployment (USURTOT) remains above 8 percent. The one flank of the U.S. economy that’s marching steadily back is the sector that once seemed the weakest: Automotive.
The auto industry in September reached an important milestone that few other sectors can claim. Carmakers sold cars and light trucks at an annualized rate of 14.9 million, taking into account seasonal adjustments, according to researcher Autodata Corp. That’s the best pace since March 2008, before the failure of Lehman Brothers Holdings Inc.
Consumers weary of driving 11-year-old vehicles with poor mileage are increasingly trading in their jalopies for new, fuel-efficient models. Small car sales climbed 50 percent last month as gasoline prices held above $3.75 a gallon. Even pickup sales, linked to the nascent housing industry, are up this year.
“Autos are the bright, shining star in the economy,” Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania, said in a telephone interview. “It’s a key cog in the economic wheel. If we didn’t have the automotive recovery, the overall economic recovery would be much weaker.”
While U.S. auto sales are on pace to rise at least 10 percent for the third consecutive year, this isn’t as good as it gets, said Diane Swonk, chief economist with Mesirow Financial in Chicago. The car market will kick into higher gear once consumers see positive equity in their homes and the housing market starts humming again. The U.S. averaged 16.8 million annual deliveries from 2000 to 2007.
“The auto recovery is still not anywhere near what anyone would expect, given the number of new drivers and the level of pent-up demand,” Swonk said in a telephone interview. “But it’s a start and not all sectors have that. There will be a big difference when people’s largest asset -- their home -- is moving up in value.”
Toyota Motor Corp. (7203) led with the biggest gain in September, with sales surging 42 percent and topping the 36 percent gain that was the average estimate of eight analysts surveyed by Bloomberg. Chrysler Group LLC and Honda Motor Co. (7267) also beat estimates.
The U.S. sales rate exceeded the 14.5 million pace that was the average estimate of 16 analysts in Bloomberg’s survey. The rate is the best industry sales pace since 14.95 million in March 2008, according to Autodata in Woodcliff Lake, New Jersey.
Honda, rebounding along with Toyota from last year’s supply shortages caused by the earthquake and tsunami in Japan, boosted sales in September by 31 percent, topping the 26 percent average estimate of eight analysts. Toyota Corolla deliveries climbed 43 percent to 23,026 and RAV4 sales surged 80 percent to 13,796, the Toyota City, Japan-based automaker said in a statement.
Nissan Motor Co.’s deliveries slid 1.1 percent, better than the average estimate of a 2.1 percent decline.
The U.S. averaged a 14.5 million annualized sales rate in the third quarter, the fastest since the 15.3 million pace set in 2008’s first quarter, according to Autodata.
Confidence is growing among automakers, including those that required bankruptcies and bailouts in 2009 to survive.
“As we look forward, we continue to be encouraged,” Kurt McNeil, vice president of U.S. sales for General Motors Co. (GM:US), whose predecessor company went bankrupt in 2009, said yesterday on a conference call.
GM shares rose yesterday when hedge-fund manager David Einhorn said the stock was inexpensive and that the automaker’s European operations may break even in 2015. GM gained 2.6 percent to $23.68, extending the automaker’s gain to 17 percent this year through yesterday’s close.
GM deliveries rose 1.5 percent, less than analysts’ average estimate for a 2.8 percent increase. The Detroit-based automaker boosted Cruze sales by 42 percent to 25,787. Deliveries of the Cruze and new Sonic and Spark small cars helped drive a 29 percent increase in the automaker’s passenger-car sales.
Chrysler sales last month rose 12 percent to 142,041 vehicles for its 30th straight gain, the Auburn Hills, Michigan-based company said yesterday in a statement. The automaker beat the 6.3 percent gain that was the average estimate of 11 analysts. Deliveries of the Dodge Dart sedan, introduced in June, climbed 72 percent from August to 5,235.
Three years ago, U.S. automakers would have seemed the least likely to be leading the economy. Yet the bankruptcies at GM and the predecessor of Chrysler Group LLC, as well as Ford Motor Co. (F:US)’s reorganization, have made those companies strong and able heading into the fragile economic upturn, Zandi said.
“The auto industry came close to death’s door,” Zandi said. “Today, the industry is on sounder ground. These are different companies now, their cost structures are lower, they’re very competitive, they have good products. That has contributed to the strength of the recovery.”
Demand for new cars and trucks plunged in 2008 when gasoline prices surged to $4 a gallon and the credit crisis sapped availability of loans for auto purchases. Banks, now bolstered by loose monetary policy, are charging U.S. consumers the lowest interest rates on new-car loans since the Federal Reserve began surveying them in 1971.
Automakers including Toyota, GM, and Ford also offered zero-percent financing on some models last month, according to researcher Edmunds.com.
“Dealers are telling us that for the vast majority of consumers who are coming in, credit is available,” Ken Czubay, Ford’s U.S. sales chief, said yesterday in a conference call. “Credit is not an issue.”
Ford Motor Co.’s light-vehicle sales slipped 0.2 percent, missing the 2.3 percent gain that was the average estimate of 11 analysts. Ford fell 1.4 percent to $9.79 yesterday in New York. The shares have slid 9 percent this year.
Deliveries of Ford’s Focus compact car surged 91 percent to 19,736, and sales of F-Series pickups, the Dearborn, Michigan-based automaker’s top-selling line of vehicles, rose 1.2 percent to 55,077.
Carmakers have capped a role reversal from the depths of the recession, when they were destroying jobs and wealth. Now the U.S. auto industry is showing how domestic companies can recover from even the most debilitating setbacks, Zandi said.
“People had given up on the auto industry as a global competitor, they thought they’d never get their cost structures in line,” Zandi said. “If there’s any good that came out of the great recession it’s that our companies are very competitive. And the auto industry represents that better than any other.”
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