Sales of brawny pickup trucks fueled strong demand for new vehicles in the United States in June, driving the industry toward its strongest month since late 2007, before the financial crisis that drove General Motors Co and Chrysler into bankruptcy.
GM and Ford Motor Co posted stronger-than-expected sales on Tuesday, and Chrysler Group’s sales met analysts’ expectations as the improving U.S. housing market led to surging demand for full-size pickups at all the U.S. automakers.
Toyota Motor Corp also reported surprisingly strong June U.S. sales.
"American families are better off than they were at the beginning of the year," Kurt McNeil, head of U.S. sales for GM, said on a conference call. "They also believe that the economic expansion is going to continue, so they’re buying more homes, and more cars and trucks."
He said stable gasoline prices, an improving employment picture and a rising stock market are boosting consumer confidence. In other good news, U.S. home prices racked up their biggest annual gain in more than seven years in May, data analysis firm CoreLogic said on Tuesday.
The auto industry has held up better than the broader economy partly because of consumers’ need to replace aging vehicles.
Overall U.S. auto industry sales in June are on track to increase about 10 percent, and according to GM will hit their strongest annual sales pace for any month since November 2007.
Chrysler, majority-owned by Italy’s Fiat SpA, expects an annual sales rate of about 16 million vehicles, including medium and heavy trucks. On that basis, Ford expects the industry to finish in the range of just over 16 million vehicles.
Medium and heavy trucks typically account for about 300,000 sales annually.
’EVERYTHING LINING UP’
"Consumer confidence is really high right now," said Fred Diaz, head of U.S. sales for Nissan Motor Co Ltd’s namesake brand. "Consumers are excited about the housing market as well. Everything is lining up for good, healthy auto sales for the remainder of the year."
Monthly sales are seen as an early indicator of the U.S. economy’s health.
In May, U.S. auto sales rose more than expected as construction workers and oil drillers bought more pickups to meet growing demand for their services, a trend major automakers expect to continue through the rest of the year.
Ford executives have said demand for the big pickups, which through May has grown three times faster than the overall industry, is so strong that sales this year should top 2 million for the first time since 2007. That plays to the U.S. automakers’ traditional strengths.
Another factor driving the demand for large pickups is the need to replace aging vehicles. More than half of those trucks on U.S. roads are over 11 years old, Ford U.S. sales chief Ken Czubay said on a call. GM said full-size pickups made up 11.7 percent of sales in June, up two-tenths of a point from May.
"It appears that that pace is not going to slow down anytime soon," TrueCar.com analyst Jesse Toprak said. "It’s as if we opened a valve and now the demand is rushing through."
SILVERADO, SIERRA SHINE
GM’s U.S. sales last month came in far higher than expected, rising 6.5 percent to 264,843 cars and trucks, or their highest level for June since 2008. Analysts had expected growth closer to 2 percent. Boding well for the overall economy, the company’s retail sales growth was a robust 14 percent, while sales of the big trucks to small business customers soared 49 percent.
Sales of the No. 1 U.S. automaker’s two top-selling vehicles, the Chevrolet Silverado pickup and Cruze small car, rose 29 percent and 73 percent, respectively. Sales of the GMC Sierra pickup were up a third.
Included in the month, GM said its dealers sold more than 6,000 of the all-new 2014 Silverado and Sierra trucks. Roughly 50 percent of production and 25 percent of sales this year will be the new models, GM officials said.
The pickups, last redesigned in 2006, are the most important vehicle introduction for the Detroit automaker since its bankruptcy. A marketing campaign for the new Silverado will begin in Texas on Thursday.
Ford’s sales also came in stronger than expected with an increase of 13.4 percent to 235,643 vehicles, above the 11 percent gain Wall Street had expected. It was the best June result for Ford since 2006. Its F-150 pickup saw sales jump 24 percent.
Chrysler’s sales rose 8 percent to 156,686 vehicles on strong demand for its two best-selling vehicles, the Ram full-size pickup (up 24 percent) and Jeep Grand Cherokee SUV (up 33 percent). It was the best June total for the automaker since 2007.
In late 2007, the U.S. auto industry was sliding toward recession, with GM and Ford losing billions of dollars, closing underused plants and cutting jobs. All three U.S. automakers have since grown so strong that they collectively exported about 1 million U.S.-made vehicles last year, according to the American Automotive Policy Council, a trade group that represents the U.S. automakers.
Sales at Toyota, the third-largest automaker in the U.S. market, rose a far stronger than expected 10 percent to 195,235 vehicles. Sales for Nissan and Honda Motor Co Ltd also came in stronger than expected. Nissan rose 13 percent to 104,124 vehicles, while Honda finished up 10 percent at 136,915.
Hyundai Motor Co’s U.S. sales rose 2 percent to 65,007 vehicles last month.