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August Auto Sales Beating Expectations

Buyers kept shopping despite hurricanes, ill economic winds.

by on Sep.01, 2011

The Versa helps Nissan buck the downturn by Japanese makers.

While a number of major carmakers have yet to report in, early indications suggest August auto sales exceeded even the more optimistic forecasts – despite fears of a double-dip recession and a hurricane that shut down much of the East Coast during the final weekend of the month.

Detroit’s automakers reported strong demand, especially for their more fuel-efficient models – as did Japan’s second-largest manufacturer, Nissan.  But sales of pickups and SUVs also fared reasonably well, as Chrysler’s Jeep brand reported.

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“We’re carrying good momentum and we’re cautiously optimistic that we’ll see U.S. economic growth improve in the months ahead,” said Don Johnson, General Motors’ North American sales chief.  During a media background briefing, Johnson suggested that, “Consumer are being cautious, yes, and appropriately so, but they are not retrenching.”

The largest of the domestic makers announced an 18% increase in sales for August, with the Chevrolet Cruze taking the lead.  In fact, Chevy’s compact accounted for a full one in 10 of all GM vehicles sold last month.  Cruze has been able to make major gains at the expense of Japanese rivals like the Toyota Corolla and Honda Civic.

The latter model’s 2012 update was launched just before Japan was struck by a devastating earthquake and tsunami on March 11.  That has resulted in ongoing production shortages which will reach “their worst” in August, according to Honda of America’s new marketing director Mike Accavitti.  Honda production reached normal levels in recent weeks and the maker is expecting to rebuild dealer inventories during September.

Neither Honda nor Toyota – which was also crippled by the March disaster – have yet reported August sales, but both are expected to post year-over-year declines.  They are hoping to regain ground in the months ahead, Honda staging a second launch for the new Civic, while the new 2012 Toyota Camry will roll into showrooms in October, and will be backed by what the maker promises will be its biggest-ever ad campaign.

Cruze sales topped 20,000 for the fifth month in a row.  As a result, Cruze could again land the number one spot among passenger car models for August, a position more typically reserved for the Toyota Camry, which has also suffered from the Japanese product shortages.

But demand was also strong for some of GM’s sport-utility and crossover vehicles, especially smaller models like the Chevy Equinox and GMC Terrain.

That was good news for Chrysler, where demand was stronger than some analysts had anticipated for the maker’s Jeep line.  Though compact products are steadily gaining ground, there are signs that American motorists have been returning to the larger products they have long loved now that fuel prices have stabilized and even declined a bit.

That is a definite plus for Chrysler, which has long depended on light trucks and which won’t have a full line-up of small cars for more than another year as it works through its budding alliance with Italy’s Fiat.  Even though the Chrysler 200 is considered one of the weaker entries in the compact car segment, it nonetheless helped the maker deliver a 31% jump in sales for August.

Among the Japanese manufacturers, Nissan has been running counter to its chief rivals, making it through the last few troubled months with sales rising despite some product shortages.  It reported a 19% year-over-year increase for August, crediting demand for smaller models such as Versa and the midsize Altima.

Nissan also saw sales of its battery-electric Leaf rise 1,362, reflecting the continuing increase in production and pent-up demand for the green machine.  GM, on the other hand, reported a weak 302 sales logged by Chevrolet for its Volt plug-in hybrid.  Chevy contends it is suffering from short supply as a result of a plant changeover, and promises sales will increase in the months ahead as production increases on the Detroit assembly line producing Volt.

But a report by Cars.com shows Chevy dealers have as many as 1,200 Volts in stock raising questions whether the problem is short supply or weak demand.  The real test will likely come in September as production continues to ramp up.

Some preliminary estimates forecast overall August sales might rise by an anemic 4%, reflecting growing concerns about a double-dip recession – and the impact of Hurricane Irene, which effectively kept potential East Coast car buyers home during the final weekend of the month.

GM has announced a deferred payment plan for buyers in regions the federal government has declared major disaster areas.  First payments will be delayed by 90 days and the maker is adding another $500 on top of existing incentive programs.

While sales appear to be running better than many had initially forecast, buyers appear to be scaling back on what they’re willing to spend for a new vehicle – even as most makers begin ramping up their givebacks to draw nervous customers into the showroom.

“Transaction prices have now declined the last three months after six months of increases, but we’re still near record high prices for new cars,” said Jesse Toprak, TrueCar’s VP of Industry Trends and Insights.

The average price paid for a GM vehicle last month dipped to $33,371, down from $33,629 during July of this year, according to an estimate by data service TrueCar.com.  GM’s incentives rose slightly, from $3,190 in July, to $3,207 for August.  Toyota’s incentives hit $2,405, a 2.2% month-over-month increase and an 18.0% jump from August 2010.

For the industry as a whole, TrueCar estimates transaction prices slipped to $29,539 for August 2011 compared to $29,558 the month before – but up from $29,151 in August 2010.  The service says incentives averaged $2,663 for the latest month, up 3.0% from the typical $2,584 giveback in July – but down 3.9% from the typical $2,772 incentive of August 2010.

The stronger-than-expected numbers for August are generating cautious optimism about the months to come, especially in light of the unexpectedly strong rebound of the stock market during the final days of August.

“Marketing and incentive focus has already shifted to September with the upcoming Labor Day weekend, so with improved inventory, the sales pace could show marked improvement next month,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates.

If there was a surprise downside for the month, it came on the used car side of the market, said Art Spinella, of CNW Marketing.  “Overall used vehicle sales from all channels fell 3.3% in August versus the same month a year ago,” he noted, adding that, “All of the decline can be traced to a softer private-party market, down more than 18%.”

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