Chilly November? Not for US car sales

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by Tom Krisher and Dee-Ann Durbin

AP

Posted on December 1, 2011 at 9:46 PM

DETROIT (AP) -- People are finally replacing the cars and trucks they held on to during the economic slump, giving a big boost to U.S. auto sales in November.

Chrysler, Ford, Nissan and Hyundai were among the companies reporting double-digit gains from last November, which is normally a lackluster month because of colder weather and holiday distractions. This November, buyers were lured by good deals, improving confidence in the economy and the need to trade in older cars.

"Consumers are just starting to say `it's time to start spending money again,' " says Larry Dominique, executive vice president of data for the TrueCar.com automotive website.

An early blitz of holiday advertising helped convince some people that it was a good time to buy. Ken Czubay, Ford's vice president for U.S. sales, says dealers saw the same rise in sales that other merchants did on Black Friday and the Saturday after Thanksgiving.

Industry sales rose 14 percent to 994,721, according to Autodata Corp. It was also the fastest sales pace since August 2009, when the government offered big rebates for drivers to trade in their gas-guzzling clunkers. U.S. sales would hit 13.6 million this year if they stayed at the same pace they did in November. That's a far better rate than the 12.6 million in the first 10 months of this year.

Car companies expected sales to improve as people who held on to cars during the economic downturn return to the market. The average age of a car on U.S. roads is a record 10.6 years, according to Polk, an auto industry research firm. And the rate of cars that are scrapped has surpassed sales for several years.

Paul Ballew, a former GM chief economist who now works for Nationwide Insurance, notes the level of pent-up demand is unprecedented. "Unless this recovery is derailed, vehicle sales will continue to move upward," he says.

A better selection of cars at Toyota showrooms also brought more shoppers back into the market. Many buyers spent the summer waiting for those inventories to improve after the March earthquake and tsunami in Japan squeezed supplies, says economist Jenny Lin, who works for Ford Motor Co.

Toyota Motor Corp.'s sales rose 7 percent for the month, the first time the company has seen a year-over-year increase since April. Sales of the subcompact Yaris more than doubled. Sales of the Prius hybrids - which now include the original car as well as the new Prius V wagon - were also strong.

But Honda Motor Co. continued to struggle, partly because of flooding in Thailand that forced the company to slow down U.S. production. Honda sales fell 10 percent for the month.

Chrysler Group LLC's sales rose 45 percent from a year earlier. They were led by the Jeep Compass small SUV, which had a nearly ten-fold increase in sales. Jeep brand sales rose 50 percent, while Chrysler brand sales nearly doubled on strong demand for its 200 and 300 sedans. Chrysler raised its incentives to nearly $3,300 per vehicle, up 6 percent from October.

At General Motors Co., buyers snapped up small cars and pickup trucks. Sales of the Chevrolet Cruze compact rose 64 percent, while the Silverado pickup, GM's top-selling vehicle, saw sales jump 34 percent.

"We are seeing a broad spectrum of customers return to the market," says Don Johnson, GM's U.S. sales chief. GM's overall sales were up 7 percent.

Ford's sales rose 13 percent, fueled by the new Explorer SUV, whose sales more than tripled over last November.

The increases reflect improving consumer confidence, which rose to its highest level since July last month, according to the Conference Board.

Attractive leases also spurred sales. Dealers offered good terms because low interest rates and high used-car values make leased vehicles worth more when they're returned. GM, for instance, is offering a Cruze lease at $169 per month for 39 months.

According to TrueCar.com, an auto pricing site, the average industry spending on incentives such as leases and low-interest loans was $2,534 per vehicle in November, up 2.5 percent from October.

Jeremy Anwyl, CEO of the auto information site Edmunds.com, estimates that 200,000 to 300,000 buyers who held off purchases over the summer and are coming back to the market now. But he thinks sales could soften this spring once those buyers are exhausted.

"I wouldn't view this as suggestive of a fundamental economic rebound," Anwyl says. Instead, he expects the recovery to continue the bumpy progress it has seen all year.

Other carmakers reporting Thursday:

- Nissan Motor Co. says sales were up 19 percent. The new Versa small car led sales with a 38 percent increase, but SUV and truck sales also rose 32 percent.

- Hyundai Motor Co. says sales rose 22 percent thanks to sales of the new Elantra, which jumped 44 percent.

- Volkswagen AG says sales were up 41 percent on the strength of the new Jetta and Passat sedans. Volkswagen sold 6,018 Passats in November, compared with 374 last November.

 

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