Cars Are Back: Automakers Report Best January in 7 Years

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Auto Sales Drive Industry Recovery as Stocks Stall

Major automakers all reported their best January U.S. vehicles sales in at least seven years, led by General Motors Co., as cheap gasoline and falling unemployment also buoyed sales at Ford Motor Co., Toyota Motor Corp. and Nissan Motor Co.

Demand for pickups and sport-utility vehicles surged, helping drive total sales up 18 percent at GM and 16 percent at Ford, whose F-Series pickup line had its best January since 2004. At GM, sales jumped 29 percent for the GMC truck brand and 20 percent for the Chevrolet brand.

Job growth and falling fuel prices have improved consumer confidence in the U.S., the world’s second-largest automobile market. Readily available credit and the aging vehicle fleet are projected to lead to a record sixth straight year of increases.

“This is going to be seen as a good month and a continuation of the trends we’ve seen,” Maryann Keller, an independent automotive consultant in Stamford, Connecticut, said today in a Bloomberg Radio interview. “It’s the fact that lenders are willing to make very good financing offers, both leasing and loans, to customers today with somewhat compromised credit, where three or four years ago they wouldn’t do it.”

The top six automakers all increased sales by at least 12 percent from a year earlier, when shoppers stayed away from showrooms amid the coldest January in two decades for the contiguous U.S. The annualized selling rate, adjusted for seasonal trends, probably rose to 16.7 million, the fastest January pace in nine years and better than the 16.5 million rate estimated by analysts. A year earlier, the pace was 15.3 million.

Best January

Honda Motor Co. and Nissan reported their best January sales ever in the U.S., as did Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi and Porsche.

GM, the largest U.S. automaker, was projected to increase sales by 19 percent, while No. 2 Ford’s deliveries were seen rising 13 percent, the averages of nine estimates. Toyota deliveries increased 16 percent, topping the average estimate for a 13 percent gain.

Shares in Detroit-based GM rose 2.6 percent to $33.98, while Fiat Chrysler Automobiles NV gained 3.3 percent to $13.95 and Ford gained 2.5 percent to $15.65, the highest in almost two months.

Ford’s new aluminum-bodied F-150 drove the automaker’s performance, with F-Series pickup sales up 17 percent, its best January since 2004, which was a record year for deliveries of that model line. F-Series also had its best January ever in Canada. U.S. sales more than doubled for the Mustang pony car, which also is sporting a new design. Ford’s Fusion sedan saw its sales decline 4.9 percent following record deliveries in 2014. The Focus compact jumped 54 percent and Explorer sport-utility vehicle sales rose 28 percent.

Fiat Chrysler

All of Fiat Chrysler’s brands gained led by the Jeep sport-utility line’s 23 percent rise. Ram pickup and work-van sales rose 21 percent, and FCA US, formerly known as the Chrysler Group, has now reported rising sales for 58 consecutive months.

Nissan’s 15 percent increase topped estimates for an 11 percent rise as sales of its Altima midsize sedan jumped 17 percent to a January record of 26,408. Honda’s sales rose 12 percent, trailing estimates for a 13 percent increase.

Bright Spot

The U.S. is a bright spot in the global auto industry as sales growth slows in China and demand in Europe is weighed down by Russia’s struggling economy. Carlos Ghosn, the chief executive officer of Nissan and Renault SA, said yesterday in a Bloomberg Television interview in Paris that the Russian auto market will shrink by a fifth this year. Sales of passenger cars and light commercial vehicles fell 10 percent in 2014 to about 2.5 million units, according to the Moscow-based Association of European Businesses.

After the U.S. market delivered a strong finish to 2014 -- November and December were two of the year’s three best months - - most analysts surveyed by Bloomberg increased their 2015 estimates, raising the average projection to 16.9 million deliveries. As recently as mid-November, the average estimate was for sales to rise about 200,000 to 16.7 million cars and light trucks for a sixth consecutive year of growth, the longest streak since at least World War II.

More Jobs

“Number one, the U.S. economy is showing more strength today, and we adjusted our figure based on the jobs reports,” said George Magliano, New York-based senior principal economist at IHS Automotive and an analyst who contributed to the survey. “Number two, energy and oil prices falling are a big boost for consumer confidence, and people are going out and buying cars and trucks.”

An improving job market and gasoline prices near $2 a gallon is likely to add 200,000 more car sales this year than analysts estimated just two months ago, according to a new survey.

Twelve of the 13 analysts surveyed boosted their estimates from November. None lowered a projection. And the average estimate now is for twice as much growth as they anticipated in November.

Like auto sales, the U.S. economy also improved in the second half of last year. The Commerce Department said the gross domestic product rose at a 5 percent annual rate in the third quarter -- the fastest since 2003 -- largely because of an increase in consumer spending.

Almost 3 million jobs were added last year, bringing the unemployment rate down to 5.6 percent, a more than six-year low. And the fewest Americans in almost 15 years applied for unemployment benefits last month in a week that was shortened by the Martin Luther King Jr. holiday.

Cheaper Fuel

At the same time that jobs are coming back, fuel prices have been falling. The average price of a gallon of regular gasoline in the U.S. was $2.067 on Monday, 44 percent less than the $3.696 it was selling for on April 26, according to AAA, the driving club.

Some customers, feeling more flush with the savings from lower fuel costs, are buying pricier versions of models they were already shopping, Fred Diaz, Nissan’s senior vice president for U.S. sales, marketing and operations, said in an interview.

“We have seen improvements in trim take rates,” said Diaz, who is based in Franklin, Tennessee. “We started to notice it in December and it’s continued in January. Overall, we’re quite pleased with what we’re seeing.”

Ford said lower fuel prices provide only “short-term” shifts in vehicle buying patterns and won’t drive demand over the long term.

“We believe fuel prices have little correlation with shifts in vehicle preferences,” Erich Merkle, Dearborn, Michigan-based Ford’s sales analyst, said today on a conference call with analyst and reporters. “Demographics and people’s changing needs drive segment changes over the long term.”

Consumer confidence increased last month to the highest level in more than seven years, the Conference Board reported last week. Another measure, the University of Michigan’s final consumer sentiment index, jumped to an 11-year high.

Busy Dealerships

“People are more confident, and they have more money in their pockets to spend on cars,” said Beau Boeckmann, president and owner of Van Nuys, California’s Galpin Motors, the largest Ford retailer in the country. “The pent-up demand, especially for trucks, is what we’re going to see in 2015.”

AutoNation Inc., the largest U.S. new-car retailer, topped analysts’ estimates as same-store new-vehicle sales rose 9 percent. Income per share rose to $1.02, compared with 89 cents a year earlier and analyst estimates that averaged 90 cents. Stock in the Fort Lauderdale, Florida-based company rose 6.5 percent to $63.17, a record high. It was among the biggest gainers in the Standard & Poor’s 500 Index.

Concerns about a subprime bubble in auto lending are overblown, CEO Mike Jackson said in an interview on Bloomberg Television. While many people saw their credit scores hurt in the financial crisis, loans secured by autos are safe bets, he said.

“Just because they’ve had prior difficulties doesn’t mean they shouldn’t have a second chance to have a vehicle and get their kids to school,” Jackson said. “We see the lowest default rate on auto loans of any type of lending, including credit and student loans.”

Light-vehicle sales may total 1.16 million for the month, a 14 percent increase from a year earlier.

Early Days

“Although January isn’t the most telling month for full-year trends, we’re encouraged by this early momentum,” Itay Michaeli, Citigroup Global Markets analyst, said in a research report.

January is typically a slower sales month for automobiles, as it usually follows a boom in holiday car sales. Sales were particularly strong in November, when the annualized rate reached 17.2 million, and December, when it was 16.9 million.

Last year, after severe winter weather suppressed new-vehicle demand, the sales lost in January were made up in later months. Full-year light-vehicle sales eventually totaled 16.5 million, the most since 2006.

“Last year’s weather is a good example of how, historically, January hasn’t been the most predictive month,” Michaeli, who is based in New York, said in an interview with Bloomberg. “But there are years left to go in terms of pent-up demand, and we’re seeing that this month.”



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