Recession reversed - New car sales, costs up in US

DETROIT (AP):

For the US auto industry, the recession is now clearly in the rear-view mirror.

New car sales jumped 17 per cent to 1.5 million in August, their highest level in more than six years. Toyota, Ford, Nissan, Honda, Chrysler, and General Motors all posted double-digit gains over last August.

Japanese automakers saw strong gains in August. Honda posted the biggest increase of all automakers, with sales up nearly 27 per cent. Consumers bought a record number of CR-Vs last month, driving sales of the crossover SUV up 45 per cent. Civic compact sales soared almost 60 per cent.

Toyota had the second-biggest increase, at 23 per cent, as Camry mid-size car sales rose 22 per cent to nearly 45,000. Nissan's sales were up 22 per cent, while Subaru's sales rose 45 per cent to a best-ever 41,061.

Hyundai's sales gained eight per cent and Kia's rose four per cent. The South Korean automakers have been struggling with low inventories this year.

Truck sales fuelled Detroit's results. GM sales were up almost 15 per cent for the company's best month since September of 2008. Chrysler and Ford each reported 12 per cent gains.

Volkswagen's sales fell two per cent, as buyers waited for a new Golf small car to arrive in showrooms.

The full-year sales pace rose above 16 million for the first time since November 2007, the month before the Great Recession officially started. Exuberant automakers said sales will likely remain at that pace for the rest of this year.

"I think it's here to stay," said Mustafa Mohatarem, GM's chief economist.

US car and truck sales totalled 16 million in 2007, then plummeted during the recession. They bottomed out at 10.4 million in 2009 and have been rising ever since. In August, they seemed to pick up speed. Mohatarem said he expects the year to end with sales closer to 15.8 million vehicles, which is higher than GM's official forecast of 15.5 million.

August's strong sales surprised analysts. Alec Gutierrez, an analyst with Kelley Blue Book, said sales unexpectedly spiked over Labour Day weekend after car companies unleashed a flurry of ads.

But even with the holiday marketing push, the trend still points to higher sales. More people are working as the economy improves, and they need cars to commute to their jobs. The cars on US roads have reached a record 11.4 years old and need to be replaced. And low interest rates - now at two and a half per cent for a four-year car loan, according to Bankrate.com - are attracting buyers.

Small-car boom

A lot of things have changed since 2007. In May of that year, the last time monthly sales topped 1.5 million, sales of small cars boomed as the nationwide average for gas topped US$3 a gallon for the first time.

Drivers have also learned to live with higher gas prices. Gas this August was the cheapest in three years, averaging US$3.57 a gallon, compared with US$3.69 last year. Toyota was even discounting the Prius gas-electric hybrid last month to woo buyers who are no longer so concerned about gas prices. The average Prius incentive was US$1,462, more than triple the incentives from a year ago, according to TrueCar.com, an auto pricing website. The incentives worked. Prius sales were up almost 30 per cent.

The market looks different in other ways. In 2007, pickup trucks made up 53 per cent of US sales. That fell to 47 per cent in 2009, when construction ground to a halt. Now truck sales are making a big comeback as contractors and other small businesses get back to work. From January through August, they made up 49 per cent of total sales. Ford sold more than 70,000 F-Series pickups last month, the second month this year that sales have topped 70,000 for the nation's top-selling vehicle.

People are paying far more for their cars than they did in 2007. Kelley Blue Book estimates the average price for a new car or truck in August was a near-record US$31,657, up from US$28,500 in 2007.

Carmakers are offering more options, like navigation systems, satellite radio and blind spot detection, and that's driving up prices. Incentives are also down. Automakers closed plants during the recession and no longer need to offer expensive discounts to sell off excess inventory.