Auto Sales Heading Up, But Cars Will Get Pricier

by , Dec 27, 2010, 7:45 AM
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December is looking to be a strong month for auto sales. And some are predicting that next year will do well. J.D. Power and Associates says the month will close out at 936,300 vehicles delivered from dealerships, 19% up from last year.

The firm says total sales -- including fleet sales -- for the month will be 1,133,000 units, which is 14% higher than December last year. Because of stronger-than-expected sales this month, the firm is increasing its forecast for the full year to -- including fleet sales -- 11.6 million units. The firm had initially anticipated that automakers would sell 11.5 million cars and trucks this year. The firm's more optimistic outlook for this year has not changed what it predicts for 2011, 12.8 million units for total sales.

Online auto research site Kelley Blue Book reports that Honda dominated the list of most-researched vehicles of 2010. Accord, Civic and CR-V were among the five most-researched vehicles at KBB.com this year. Toyota's Camry was number four, and Hyundai Sonata number 5. Honda has four vehicles in the top ten most-researched; Toyota has three; and Hyundai, Ford and Nissan have one each. The top five brands this year in terms of volume of consumer research at KBB.com were Toyota, Honda, Ford, Chevrolet and Nissan, according to Kelley Blue Book.

Those were the same five brands as in 2009, but the firm says Toyota declined in share of market interest by 2.4% for 2010, while Ford's share of market interest continues to grow. Ford's share of market interest increased 1.5 percentage points, while Honda, Chevrolet and Nissan stayed flat year-over-year.

Tustin, Calif.-based automotive marketing firm AutoPacific sees 2010 closing out at 11.4 million units, which the firm says is more or less what it saw down the road a year ago. Looking ahead, AutoPacific sees 2011 as an on-ramp to recovery that will last at least through 2016 "at a healthy but mild pace" of 6% per year. The firm -- which expects 12.4 million sales for 2011, which would be a 7.7% improvement over this year -- says a better credit picture and a raft of new vehicles will drive improvement.

"Even with economic recovery, various economic indicators such as consumer confidence, home values, and perhaps most tellingly, unemployment, remain at worrying levels," said Ed Kim, director of industry analysis at AutoPacific. "These are longer-term problems that will take time to fix, so economic recovery -- and hence auto sales recovery -- will occur over several years."

What won't happen, according to AutoPacific, is any near-term volumes like those before the recession, which neared 17 million units. In fact, AutoPacific does not expect that the market will return to anything like the near-17-million unit volumes that the market reached before 2008.

That is partly due to the economy, but also because new technologies and the federally mandated CAFE rules that will kick in around 2015 will make vehicles more expensive, according to AutoPacific.

And more cars will be fighting for less share, notes the firm -- which says that by 2016, there will be over 320 nameplates in the marketplace versus 198 in 1998, which AutoPacific says was the last time the U.S. auto business sold in the neighborhood of 15.7 million vehicles, the same number that the firm predicts for 2016. "Thus, each nameplate will be fighting for a smaller piece of the pie, making it tougher for each of those nameplates to be profitable -- especially when costs associated with technology and CAFE regulations will make vehicles more expensive," says the firm.

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