The Top US Automaker Is Confident About Its Prospects

Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The largest automaker in the US, General Motors (NYSE: GM), finished 2012 with a market share of 17.9%, the lowest since 1924. The automaker’s market share went as high as 51% in 1962 and it continued to remain a dominant player until 1997, when it occupied 31% of the market. Even after experiencing its lowest market share, the Detroit automaker is positive about its outlook this year. Bloomberg analysts believe that the company’s market share will remain stable this year and finish at the same level as the previous year.

An increase in the number of options and the launch of new models is attracting more and more buyers. The return of Toyota (NYSE: TM) and Honda (NYSE: HMC) after being hit by the disastrous Tsunami in 2011 has also impacted sales level. This is exactly why the top US automaker is experiencing a decline in its market share.

The return of the Japanese counterparts
The production of Japanese automakers was disrupted after being hit by the natural disaster in 2011, which resulted in a drastic fall in their sales level. The return of Toyota and Honda has been a strong reason for the solid 13.4% sales rise to 14.5 million trucks and cars in the US auto market. As per Bloomberg estimates, this figure is expected to touch 15.1 million in the present year. This isn’t an ambitious number considering the current purchasing trend and consumer urge to replace their cars.

GM witnessed a 3.7% rise in sales and sold 2.6 million vehicles, which includes its December sales of 245,733, which wasn’t as good due to soft Cadillac and truck sales. The Chevy Sonic subcompact and Chevrolet Equinox SUV were the chief models that drove the sales during the period. GM was followed by Ford (NYSE: F), which sold 2.3 million vehicles, up 4.7%. The Fusion sedan and the Escape SUV were the most popular offering during the year, and the recently launched C-Max hybrid did fantastically well in December.

However, the Japanese automakers are eating away the market share of the US car manufacturers. Toyota reported a massive 26.6% increase in sales, selling 2.08 million units during the year. It enjoyed a 9% rise in the December sales, selling 194,143 vehicles. The solid sales performance was majorly attributable to its handsome lineup of new models, including the Camry, the best selling model in the period. Honda also saw an impressive jump in sales and reported a 24% increase by selling 1.42 million units in the year. The automaker’s December sales were remarkable, as it experienced 26% growth by selling 132,774 units. Civic and Accord were the key revenue drivers for the automaker’s phenomenal performance. Nissan Motors' sales grew 9.5% to 1.1 million, out of which 302,934 units sold were the Altima, the top selling Nissan car of the year.

The current year outlook
GM led during the year in terms of market share with 17.9%, followed by Ford, which occupied 15.5% of the auto market. Toyota stood close behind with 14.4% market share. According to several analysts, the current year wouldn’t change much for these automakers. Volkswagen, Honda, and Nissan would be the more interesting ones to watch. In fact, the German auto giant Volkswagen beat the Japanese automakers in terms of the sales growth in 2012.

On the other hand, GM is confident about its growth prospects. It has slated the release of about 12 Chevrolet models and some Cadillac models a well. The automaker also plans to be working on an all new exciting safety feature, the “Weather Channel,” which would give updated news about the weather condition to the drivers using radio waves so that they can ‘be safer and better prepared while making their life easier.’ Even Toyota is working on the same sort of thing, and is expected to add the feature in its upcoming models.

My takeaway
US auto sales increased 13.4% to 14.5 million vehicles, the highest in the past five years. The recovering economy and improving macroeconomic factors are supporting the industry growth. Improvement in employment levels and rising consumer confidence is making consumers increase their spending. Spending levels have also been boosted by banks offering easy credit at lower interest rates. There is huge pent-up demand from buyers who are feeling the need to replace their aging cars to experience the smart and attractive features of newer models. The wider variety of options and the rising competition will make the auto sector reach new highs. It will be extremely interesting to track the industry with so many automakers battling it out for a better position.


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