The US Auto Industry Is Off To A Good Start

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

The US auto industry continues to show signs of recovery and growth as it posted handsome figures for January. The industry is recovering with stronger numbers and recorded 2012 as the best of the past 5 years. Though the US economy recovered at a moderate rate in the past year, the auto industry delivered solid numbers with improving consumer confidence.  The year has kicked off to a great start and the industry is expected to record 15 to 15.5 million units’ sales.

The Detroit Three recorded double digit sales gains in January, which were pretty impressive given the general trend. Let’s take a closer look at the performance of these automakers.

Diving into the number pool
General Motors
(NYSE: GM) continued to be the number one car company in sales. It witnessed a sales surge of 16% compared to the year ago period by selling 194,699 units. As the economic conditions are improving, the top US automaker is confident about future outlook and the prospects of its upcoming launches. Cadillac sales were up 47%, while Buick's redesigned Enclave crossover experienced a 57% jump in sales. Sales of Chevy Silverado increased 32%, while the Sierra enjoyed 35% sales growth.

The second Detroit auto maker Ford (NYSE: F) also experienced an impressive 22% sales growth. It beat the analyst estimates of 164,500 units by recording sales of 166,501 vehicles last month. Both Fusion and Escape are doing exceptionally well for the automaker. The new Fusion has been well-received by consumers, which is reflected in the strong 65% sales growth of the vehicle. Ken Czubay, the VP of US Marketing, Sales & Service, points out that the company’s investment in fuel efficient cars and hybrid technology is giving impressive returns.

The third largest US automaker Chrysler may have slightly missed analyst expectation, but still saw a decent month.  In fact this was the company’s best January in the last 5 years. It enjoyed a 16% sales growth by selling about 117,700 units against a forecast of 121,000 vehicles.

Even the foreign automakers experienced remarkable growth in sales as the pent-up demand and discounts on a few segments continued attracting customers.

The foreign counterparts
The Japanese counterpart Toyota (NYSE: TM) continued to deliver solid growth with sales rising 26.6% to 157,724 vehicles compared to the prior year figures. The sales of Tundra were up 27%, while Corolla saw a 32% increase over the previous year. Toyota’s recovery has been remarkable considering the supply chain disruption is suffered when its production units got hit by Tsunami.

The German automaker Volkswagen saw its best January since 1974. The automaker’s sales increased 6.7% to 29,018 vehicles. Jonathan Browning, the Chief Executive and President of Volkswagen Group of America, is very positive about the momentum of the automaker and expects its growth to outrun the industry this year.

Hyundai’s sales went up 2.4% over the prior year to a record high of 43,713 units. The automaker is very optimistic about its growth prospect with the launch of new models. Japanese auto manufacturer Nissan recorded a 2% increase in sales by selling 80,919 units. The sales number was mainly driven by the 2013 Pathfinder, which hit the showrooms in November.

The bottom-line
The US auto sector is off to a good start with 1.1 million vehicles sales in the first month, a rise of 15% compared to a year ago figures, according to TrueCar.com. Total vehicles sales were down 22% compared to December 2012, but they are decent enough. Traditionally January is not quite an exciting month for the automakers. Sales are generally down particularly after December’s festive season discounts, year-end clearance offer, and other special offers. Many buyers plan their new cars during December to take advantage of the year-end offers and discounts, making the month of January slow.

Despite the lack of discounts and offer January sales were good, which is positive news for the auto players. Consumer confidence is rising and people are willing to replace their old models with the new offerings. The introduction of new models with attractive features and lower interest rates are attracting more and more buyers.


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