In The News

Analysts Forecast Best Auto Sales Since 2006

Auto industry analysts predict that deliveries of new cars and light trucks will rise to 16.3 million by the end of the year. That would make 2014 the best year for auto sales since 2006, when 16.6 million units were sold.

Automakers are benefiting from widely available credit and low interest rates, said Jessica Caldwell, an analyst with Edmunds.com. A change in buying habits also is making owning a new car more affordable over time with leasing and longer-term loans attracting buyers, she said.

Each major automaker, with the exception of Volkswagen AG, is predicted to report a year-over-year sales increase. Chrysler Group may report a sales jump of 23% from a year earlier, analysts predict. Ford and General Motors may see gains of 9.2% and 11%, respectively.

Strong sales figures during May, June and July allowed the industry to compensate for a sluggish start to the year, when frigid winter weather in the Northeast and Midwest kept buyers away from dealer lots, Caldwell said.

Sales are on pace for a fifth consecutive year of growth, according to the average estimate from 12 auto analysts surveyed by Bloomberg News.

The average spending per vehicle on light-duty trucks fell 10% during the first half of this year, but Ford’s truck spending rose 2.3%, according to researcher Autodata Corp.

Automakers are in a much stronger position than the last time sales figures were this high, Caldwell said.

In 2006, U.S. automakers GM, Chrysler and Ford were facing increased competition from Asian manufacturers, higher labor costs and rising gasoline prices that dinged sales of pickup trucks and sport-utility vehicles, their most profitable models. Three years later, Chrysler, the third-largest U.S. automaker, and GM, the largest, declared bankruptcy and were rescued by federal bailouts as industrywide sales dipped to a 27-year low, with just 10.4 million units delivered.

Ford avoided a similar path to GM and Chrysler when former CEO Alan Mulally instituted a drastic restructuring at the second-biggest U.S. automaker after taking the helm in 2006, mortgaging assets including the Dearborn, Michigan-based company’s logo. Mulally discontinued Ford’s Mercury brand and divested premier brands Jaguar, Aston Martin, Volvo and Land Rover.

GM plans to introduce 15 new or refreshed models this year, compared with Ford’s 23.

“Production, for one thing, is much healthier now. The American automakers aren’t just producing to produce cars now. They’re doing a much better job of meeting supply and demand,” Caldwell said.

While sales in the second half of the year should be strong, some of that momentum will come from pent-up demand as drivers who stayed away from dealer lots during winter months start shopping, said Alec Gutierrez, an analyst with Kelley Blue Book in Irvine, California.

“We have to remember that January and February came in quite weak, so some of what we are seeing could be purchases that were delayed at that time,” Gutierrez said.

His forecast for 16.3 million vehicles this year hasn’t changed even with a strong sales outlook for the rest of the year, he said.

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