Auto sales reach prerecession heights

Trucks drive up profits for Detroit

7/3/2013

Automakers crossed the year’s halfway point running on all cylinders, with June sales reaching levels not seen since before the recession.

General Motors Co., Chrysler Group LLC, and Ford Motor Co. all posted strong gains, as did their chief overseas rivals. Among major automakers, only Volkswagen posted a decline in June.

For Detroit, sales of full-size pickups continue to power gains.

Ford said sales of its F-series trucks were up 24 percent in June to 68,009 — the best June since 2005. General Motors reported sales of its GMC Sierra and Chevrolet Silverado full-size trucks were up 29 percent year-over-year to a total of 59,827. And Chrysler, which announced earlier this week an upcoming diesel option for its Ram 1500 pickup, said its full-size truck sales were up 24 percent in June.

In addition to being somewhat of an economic bellwether — GM said year to date its pickup sales to small business buyers are up almost 50 percent — pickup sales are also great revenue generators for the automakers. And prices are rising as automakers add fancier features. Pickup trucks sold for an average $40,361 in June, up 2 percent from last year, according to Kelley Blue Book.

But trucks weren’t the only thing driving sales. Small and subcompact cars sales were also strong, possibly because young graduates went shopping for a new car, said Kelley Blue Book analyst Alec Gutierrez. Relatively high gas prices also may have steered some buyers to more fuel-efficient models, he said. Gas averaged $3.60 a gallon nationwide in June, or 10 cents more than a year ago.

Among the Detroit Three, Ford posted the biggest gain, with a 13 percent increase from June, 2012. General Motors said its sales were up 6.5 percent. Chrysler Group sales were up 8 percent, for the 39th consecutive month of year-over-year gains.

And Chrysler continues to post monthly gains without the help of a key Jeep model. The Toledo-built Jeep Cherokee isn’t expected in dealerships until late August, and supplies of the discontinued Liberty are nearly exhausted. Chrysler said it sold 94 Libertys last month, down from nearly 8,000 in June, 2012.

In spite of that, Jeep brand sales were nearly flat year-over-year, thanks to continued strength of the Toledo-built Wrangler and the flagship Grand Cherokee. Chrysler said Wrangler sales, which topped 16,000 units for the second straight month, were up 12 percent, while sales of the Grand Cherokee rose 33 percent over last year.

While June was especially strong, auto sales have been good all year long. Sales in the January-June period topped 7.8 million, their best first half since 2007, according to Autodata Corp. and Ward’s AutoInfoBank. Automakers said June sales rose 9 percent to 1.4 million in June.

The outlook for the rest of 2013 is just as strong. The factors boosting sales — low interest rates, wider credit availability, rising home construction, and hot new vehicles — will be around for a while, and experts are hard-pressed for answers when asked what could slow things down.

“It all points to continuing improvement in the auto market,” said Mustafa Mohatarem, General Motors’ chief economist.

Analysts expect total sales of around 15.5 million cars and trucks in 2013, which would be 1 million more than in 2012. New cars and trucks sold at an annualized rate of 15.96 million in June, the fastest monthly pace since December, 2007. From January to May, the pace averaged 15.2 million, according to Jessica Caldwell, a senior analyst at car buying site Edmunds.com.

Consumer confidence hit a six-year high in June. And the Standard & Poor’s 500 index had its best first half since 1998, up 12.6 percent. Those measures correlate strongly to auto sales, since people have to feel optimistic and financially secure before buying a car.

At the same time, rates on auto loans remained near historic lows in June. The rate on a four-year new-car loan is averaging 2.7 percent, according to Bankrate.com.

Federal Reserve Chairman Ben Bernanke has pledged to keep short-term interest rates at record lows until the unemployment rate hits 6.5 percent, if not longer. The unemployment rate is currently 7.6 percent. Auto loan rates are pegged to short-term rates, so car buyers should enjoy low financing terms for a while longer.

Automakers can also keep rates low through their captive finance companies, Edmunds.com’s Caldwell said. She expects car companies to help keep rates low for a while, since raising them could hurt sales.

Blade business writer Tyrel Linkhorn and the Associated Press contributed to this report.