Automakers Put the Pedal to the Metal as Car Sales Spike

Source: David NcNew/Getty Images
Source: David NcNew/Getty Images

The economy is recovering, albeit sluggishly. But that hasn’t stopped consumers from getting out and spending money.

Retail sales in August were up 0.6 percent from July, according to new data released by the Commerce Department. ABC News reports from the Associated Press that while this may not seem like a very flashy number, it’s a part of an overall growth trend that represents a 5 percent boost in the past year. Leading the charge, particularly during August, was the auto industry. Car sales made up around half of the overall consumer spending jump.

Infusing the consuming public with more confidence is a brighter economic outlook — and some analysts expect things to continue to get better, including senior U.S. economist at Capital Economics, Paul Dales.

“With further jobs gains, rises in income growth and a loosening in credit conditions in the pipeline, consumption growth should strengthen in the fourth quarter and into next year too,” says Dales.

That’s good news for retailers across all segments of the economy and great news for the automotive industry in particular.

In total for August, 1.58 million vehicles were taken home by customers, a number that represents the auto industry’s best month in more than a decade. Not only that, it also shows a 5.4 percent increase in auto sales over the past year alone. The big winners? Chrysler (FIATY.PK), which saw a 20 percent boost in sales, and Nissan (NSANY.PK), which increased sales by 12 percent.

As we’ve covered previously, Ford  is also making some tremendous strides, but General Motors has fallen on extremely rough times following one of the most catastrophic years for an auto maker ever.

Source: The Wall Street Journal

The Wall Street Journal put together a solid visualization of last month’s sales data, and we can see from the middle chart that the auto industry definitely had a solid month. The beginning of the year — February and March, to be exact — definitely saw the biggest economic uptick so far this year, but August was able to topple the remaining months in terms of consumer spending.

The sales boost is refreshing from all perspectives, as consumers have really had a rough time over the past eight or so years dealing with a stagnant and sluggish economy. Many people have probably been putting off purchasing a new vehicle until they were on more sound financial footing, and now that there is a bit of economical traction, perhaps this is the right time.

In addition to Chrysler and Nissan’s strong showings, all automakers — with the exception of General Motors and Volkswagen — have reported a year-over-year spike in sales, as reports. Toyota  sales are up 6.3 percent, and Honda is up 0.4 percent. Also playing a part in improved consumer confidence is a dip in energy prices, which have led to lower gas prices for most Americans. As some regions have seen prices spike to more than $4 per gallon, the national average currently stands at around $3.40.

And there’s the possibility that things could get even better. In terms of what people are paying at the pump, anyway. The Kansas City Star says that the possibility for gas at prices below $3 per gallon could hit the Midwest. “Some states could see a monthly average pump price below $3 a gallon at the end of the year,” Adam Sieminski, head of the Energy Information Administration, said in a statement.

Naturally, lower prices wouldn’t hit all over the country. But the prospect of gasoline at those prices is sure to spur even more consumer excitement, especially considering just how expensive gasoline — and by proxy, owning and driving a car — has become. 

Source: Scott Olson/Getty Images
Source: Scott Olson/Getty Images

So what’s in store for the rest of the year?

Labor Day weekend is typically a big sales boost for most dealerships, so the next sales report should reflect that. Dealers and manufacturers went all-out in terms of holiday pricing this year, hitting customers with a wide variety of incentives to pick up a new car, truck or SUV. Zero percent financing and cash-back bonuses were some of the major tactics, and if any of the momentum from August carried over into September, the next sales report should be very pleasing for industry leaders.

There are a lot of factors that will ultimately play into how the market sorts itself out, and geopolitical situations across the world — notably the Middle East and eastern Europe — may have an active role. If tensions continue to rise, energy prices may actually spike instead of fall, which would have a domino effect across consumer spending.

Sales should also cool down following September, and the end of the summer buying season. Trucks and SUVs should still remain popular as customers prepare to handle winter driving, and dealers will likely pull out all the stops in moving out the remaining 2014 model year inventory from their lots in preparation for next year.

As things stand, sales numbers are up for almost all auto manufacturers, and consumer confidence is at a high water mark for the past several years. If car companies can keep their proverbial foot on the gas and capitalize, positive growth should be able to sustain going into 2015.