Automakers Gear Up for Strong Second Half

June Sales End with Fireworks

After the fireworks of early July 4 promotions, U.S. light-vehicle sales heated up in late June. Now automakers are preparing for a second half as strong as the first six months of a surprisingly robust 2012.

A big final week of sales and model-closeout specials pushed June volume up 22 percent to 1.3 million units. The seasonally adjusted annual selling rate rebounded to 14.1 million, beating analysts’ expectations and May’s disappointing 13.8 million.

“We expect the industry to maintain that pace through the end of the year,” declared Bob Carter, boss of the Toyota brand, whose sales were among the biggest contributors to the strong month. “As a result, we are adjusting our 2012 projection to 14.3 million, quite a jump from our 13.5 million forecast of just six months ago.”

The Detroit 3 and top international automakers such as Toyota, Honda, Hyundai, Nissan and Volkswagen are adding shifts and hiking production to meet demand.

Consumers keep replacing vehicles from the oldest U.S. fleet on record. Credit is readily available, and interest rates are low.

Buyers are snapping up new models with cool infotainment and powertrain technology and much-improved fuel economy. And large pickup trucks are soaring as gasoline prices fall and home construction creeps upward.

In June, nobody took more advantage than Toyota and Honda. Fully restocked from the post-quake shortages that slammed them a year ago, Toyota Motor Sales’ volume jumped 60 percent and American Honda’s volume 49 percent. Nissan North America jumped 28 percent.

Every automaker except Mitsubishi boosted June sales.

It wasn’t easy in a sluggish economy, and it took some high-profile promotions, such as Chevrolet’s Independence Day Cash and the Ford Summer Sales Event. The Chevy event, which was launched June 20, put more cash on the big-selling Cruze and Traverse.

Most analysts had expected June sales to be as soft as May, but July 4 promotions started in the final week.

“Quite a bit of merchandizing going on last weekend,” Ford’s U.S. sales boss Ken Czubay observed as sales were reported July 3.

First-half volume is 15 percent ahead of 2011, which finished at 12.8 million.

Absent a big downturn, this year’s sales will race past the 13.2 million mark of 2008, the first year of the Great Recession.

That’s still well short of 2007, that last year of nine straight years over 16 million, a period marked by overproduction, bloated inventories and out-of-control incentives.

But the 2012 market is far sounder. Even after three years of growth, the U.S. auto industry has unusually lean stocks. Incentives are modest and highly targeted, and production is closely linked to actual demand. Thus, transaction prices continue to rise.

Deutsche Bank analyst Rod Lache said the SAAR could slip this month before returning to 14 million in August. “We believe July 4th holiday sales were pulled into June,” he wrote.

Kurt McNeil, GM’s vice president of sales operations, said despite conflicting economic data, “we are seeing some decent results in housing, fuel prices are down and the availability of consumer credit is a positive.”

As gasoline spiked to an April high of $3.93 a gallon, consumers flocked to fuel-efficient small and mid-sized vehicles, pushing April’s selling rate to 14.4 million.

By July 2, gasoline had fallen to $3.36, according to the U.S. Energy Information Administration. June buyers generally stayed focused on efficiency, but pickup buyers started to return to the market.

And cheaper fill-ups put a bit more in all drivers’ pockets. “This is acting like a tax cut for consumers,” said Ellen Hughes, Ford’s chief economist.

GM’s McNeil said: “We knew there were going to be headwinds this year. We still see headwinds. But we’re calling for moderate, gradual economic growth.”

Author: alisonsawhill

Marketing and Advertising Manager, 20+ years of success, working with clients on a local, regional and national level. Experienced in strategy, development and execution of clients marketing plans using all media tools, including Radio, Internet, Social Media, Events and Promotions.

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