• by Karl Greenberg , January 21, 2014

Gone are the days of entirely incentive-driven volume. Analysts see significant increases in auto sales this year, but not at the expense of margins. Car consultancy AutoPacific thinks the business will see a 550,000-unit increase versus last year, reaching retail numbers in line with pre-recession volume, while incentives will remain relatively low. AutoPacific predicts the industry will deliver 16.1 million units this year.

"Today, automakers are generally producing the volumes that the market dictates and selling vehicles at profitable margins," said Ed Kim, VP of industry analysis at the Tustin, Calif.-based firm, in a statement. "The days of filling plant capacity and then piling on incentives to move the metal are over. Sales are strong, but just as importantly, sales are being earned in a healthy and sustainable manner."

Edmunds.com made similarly salubrious predictions last year, noting in a fourth-quarter report that the average car on the road is 11.4 years young, notwithstanding accelerating recovery in the business. Edmunds also noted some structural drivers for continued strong sales: used-car prices were also up because of tight supply -- and, Edmunds predicted, about 800,000 leases will expire this year. The firm predicted this year would be the best since 2006.

Said AutoPacific's Kim: "This represents progressing recovery in the U.S. light vehicle market, made possible by continued economic recovery, an improving job market, good access to credit, and pent-up demand as consumers replace older vehicles they held onto through the recession." He added that there's a feedback loop fueled by buyer psychology. "With this continued recovery on multiple levels, consumers are more comfortable making a vehicle purchase."

What about trucks, which saw a big return last year after a 2012 where small cars came out of the shadows? AutoPacific says trucks will again drive volume this year. Pickups will drive the segment because of the re-animation business, housing starts and other construction. The firm says crossovers will keep bringing in families, especially as automakers increase fuel economy with drivetrain innovations. 

But Edmunds predicted this would be the slowest year-to-year growth since auto sales bottomed out in 2009. AutoPacific said that beyond 2014, growth would taper, reaching about 16.7 million units by 2019.

"Car Dealership" photo from Shutterstock.