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Economist: Auto Sales Will Rise Again Next Year

LOS ANGELES – The good times will keeping rolling for the auto industry next year, with higher sales and continued low gasoline prices, the National Automobile Dealers Association’s chief economist predicts, reported Detroit Free Press.

Sales of new vehicles, already on pace to top 16 million for the first time since the mid-2000s, will increase to 16.94 million in 2015. That would be an increase from this year’s expected 16.4 million, the NADA says.

“Rising employment and wages, continued low interest rates and lower gasoline prices all signal an increase in new light-vehicle sales in 2015,” NADA Chief Economist Steven Szakaly said in a statement. The prediction was released ahead of the Los Angeles Auto Show here.

The sales increase is based on a predicated 3.1% increase in the gross domestic product, up from 2.1% this year. The forecast is pretty much rosy all around, with an expected 242,000 new jobs being created a month next year. Both workers’ disposable income and corporate profits will rise.

Best of all for the auto industry, oil prices will stay low. “Lower oil prices, which translate into lower prices at the gas pump for consumers, increases household spending on other goods and services, resulting in higher growth,” Szakaly said in his statement. “If oil and gasoline prices remain low through 2015, we could easily see consumers return in even greater numbers to the light-vehicle market during the second half of 2015.”

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U.S. Auto Sales Expected to Rise Modestly in 2015

New York – Auto analysts said Tuesday U.S. sales will continue to rise in the next few years, but the pace of growth will slow further in 2015, reported The Detroit News.

U.S. auto sales are on pace to rise 5 percent in 2014 to 16.4 million — the best performance since 2006 — after rising by nearly 8 percent in 2013. The consensus is “cautious optimism” as production and sales will grow far faster in Asia, while Europe and South America face significant economic concerns.

LMC Automotive senior vice president Jeff Schuster said at a Standard & Poors auto industry conference that it predicts sales will rise just 2 percent next year to 16.7 million — fueled by 100 new, refreshed and redesigned vehicles being introduced in 2015, including Ford’s new aluminum F-150.

LMC sees U.S. sales rising to 17 million by 2018. LMC predicts the market will rise to 17.5 million in 2020 — which would represent the highest ever U.S. auto sales. Auto sales were above 16 million between 1999 and 2007 — hitting a high of 17.4 million in 2000.

JD Power notes that U.S. consumer spending on new cars and trucks will break a record in 2014 — estimated at $407 billion — up from $376 billion in 2013 — as average transaction prices have risen dramatically to $30,000 this year — up from $26,560 in 2007. U.S. retail sales in 2014 expected to be 13.8 million vehicles is near an all-time record, with incentive spending up slightly in 2014 at $2,975 over 2013 when it was $2,834.

This year’s spending is more than the gross domestic product of Austria, said Joe Derkos, director of consulting and analytics at J.D. Power.

Automakers keep introducing new models. LMC says automakers will hike the number of U.S. models offered from 295 this year to 331 in 2018 — with 75 new nameplates expected through 2018 — along with 200 redesigns and 210 facelifts. As a result, the average number of vehicles sold per model will fall from 55,463 this year to 51,728 in 2018, LMC said. Biggest growth through 2018 will be in small luxury cars and small luxury SUVs.

But 2018 sales of 17 million will be more profitable than sales in 2006, since there will be fewer rental car and other fleet sales in 2018 than 2006, LMC says.

There are risks to future sales growth including the eventual rise of interest rates. S&P noted that some subprime auto lenders are offering more than 72-month repayment periods. Derkos said every 1 percentage point increase in interest rates could reduce auto sales by up to 300,000 vehicles, or $8 billion in lost revenue. For buyers with good credit, the average interest rate paid on 72-month car loans has fallen from 7.3 percent in 2007 to 3.8 percent this year. But low interest rates and longer loans means some buyers have been more willing to buy more expensive cars.

Derkos noted that a $16,000 entry level compact car would cost about $469 a month at 2 percent interest for a three-year-loan, while a $32,000 compact luxury car would cost $477 a month over six years at the same 2 percent interest rate. In 2014, the number of new vehicles financed for at least 72 months is expected to be about 32 percent — up from 30 percent last year — and up from 22 percent in 2009.

After a weaker than expected start to sales this year, sales were stronger than expected in spring and summer and are expected to finish strong. Low gas prices, pent-up demand and stronger employment numbers are all fueling growth. Satyam Panday, an S&P economist, said continued job growth is key to auto sales. S&P expects “robust auto sales to continue for the rest of the year and into 2015.”

Big winners this year: Mitsubishi — expected to be up nearly 20 percent for the year — followed by Subaru, Nissan, Fiat Chrysler and Mazda — all up more than 10 percent this year. Toyota Motor Corp. and Hyundai and Kia — controlled by the same Korean company — are the only other major automakers — expected to outpace the industry, Schuster said. Fiat Chrysler’strong sales performance has been one of the continuing “surprises,” Schuster said.

General Motors Co. is expected to come close to the industry’s 5 percent gain. Ford is expected to be down slightly for the year, while Volkswagen AG has had the worst performance of any major automaker in the United States this year.

Non-luxury SUVs are up 1.2 percentage points of market share to 28.2 percent, while large cars are down. Luxury cars have boosted market share by 0.1 percentage points to 12.2 percent.

But in the next few years, Asia will outstrip North America and other regions for production growth — rising from 45 million this year to 60.1 million in 2020.

By 2020, North American production will rise to 19.2 million — up from 16.8 million this year. Of North American production capacity, 25 percent will be in Mexico by 2020 — up from 17 percent today, while U.S. production capacity will account for 64 percent of North America, down from 70 percent today. Many major automakers are currently building new auto plants in Mexico.

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U.S. Auto Sales Seen Ending Summer Without A Sizzle

U.S. auto industry sales in August will be about even with a year ago, not quite ending the summer in a sizzling fashion but still warm enough to continue the recovery from a recession now five years in the rear-view mirror, reported Reuters.

Analysts polled by Thomson Reuters expect monthly sales of about 1.5 million new vehicles when automakers report them on Wednesday, with a seasonally adjusted annualized sales rate of 16.6 million. It should be the sixth straight month showing an annualized rate above 16 million, a level reached only twice in 2013.

Auto sales are a closely watched indicator of consumer demand, particularly for big-ticket items, and the industry accounts for roughly one-fifth of all U.S. retail spending.

While sales would be flat with last August, the annualized rate for the month would be up from 16.1 million a year ago because there was one less selling day this year.

Profit-eroding incentives remained high in August, as dealers trimmed prices to help clear lots and make way for 2015 models. Industry research firm Kelley Blue Book said incentives, including rebates and cash-back offers, were on track to end the month between $2,700 to $3,000 per vehicle.

The biggest discounts were on mid-size sedans, which are staying on dealer lots more than 80 days before being sold, compared to 47 days for small crossover sport utility vehicles, Kelley Blue Book said.

While auto sales have strengthened to nearly pre-recession levels, there is concern among some analysts that longer-term loans and increased lending to subprime buyers may be inflating sales. Some new vehicles are being sold with 7-year loans, which could cause owners to hold onto their cars longer, because equity is not established until late in the pay-off cycle.

Chrysler Group LLC, a unit of Fiat SpA, and Nissan Motor Co once again gained market share in August to the detriment of sales leaders General Motors Co, Ford Motor Co and Toyota Motor Corp, according to analysts.

Eight analysts polled by Reuters expect Chrysler to show a monthly sales gain of 13.5 percent, while Nissan is seen ending August up 2.4 percent. Among major automakers, the two are expected to be the only winners.

Michelle Krebs, an analyst with Kelley Blue Book, expects Chrysler will only enjoy a few more months of double-digit gains. This year’s gains by Chrysler have been helped by the fact that sales of Jeep Cherokee SUVs were compared to low sales of a model it replaced in late 2013, the Jeep Liberty.

The Reuters poll showed monthly sales declines for GM, down 1.2 percent, Ford, down 1.4 percent, Toyota, down 2.3 percent and Honda Motor Co off 7.9 percent. Hyundai Motor Co and its affiliate Kia Motors Corp are seen down a combined 0.8 percent.

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U.S. June Auto Sales Keep Climbing

Low interest rates and a brighter economic outlook drove U.S. new-vehicle sales higher for most major auto makers in June, allaying worries of a market slowdown and setting the industry up for a strong second half, reported The Wall Street Journal.

Industry-wide auto sales rose 1.2% to 1.4 million in June, pushing the annualized selling rate to 16.98 million, its highest pace since July 2006, according to market research firm, Autodata Corp.

For the first half of the year, auto makers sold a total of 8.2 million vehicles in the U.S., up 4.3% over the same year-ago period.

General Motors Co. continued to throw off worries over its massive safety recalls as consumers pushed up its June U.S. sales, while Fiat Chrysler Automobiles NV’s sales soared on rising demand for its pickup and sport-utility vehicles.

Toyota Motor Corp. said its U.S. sales rose 3% in June over a year earlier, and Nissan Motor Co. reported a 5% gain. Hyundai Motor Co.’s U.S. sales rose 4% last month.

But it wasn’t a good month for all. Ford Motor Co. sales fell 6% as it tapered sales to fleet buyers, such as car-rental companies, and prepared to launch a new, aluminum-bodied F-series pickup truck.

Honda Motor Co.’s U.S. sales declined 6% as demand for its passenger cars and sport utilities also fell. Volkswagen AG’s U.S. unit reported a 22% decline for its namesake brand amid a lack of new-model rollouts.

After torrid sales in May, which included five weekends compared with June’s four, analysts expected industry sales to cool. May had a seasonally adjusted annual selling rate of 16.77 million vehicles.

June had two fewer selling days than the same period a year earlier and was tarnished by a rash of safety recalls.

GM has recalled about 29 million cars and trucks in North America so far this year. This wave of recalls comes after GM waited more than a decade to fix a defective ignition switch on 2.6 million older-model small cars that prevented some air bags from deploying during a crash. The auto maker has linked the ignition-switch defect to at least 13 deaths in North American accidents.

“Everyone was expecting sales to fall off the cliff in June and that didn’t happen,” said Fred Diaz, Nissan’s head of U.S. sales and marketing.

Encouraged by the surprisingly strong June, industry executives say demand remains on track to finish the year with U.S. new light-vehicle sales of more than 16 million. Demand also is aided by an aging auto fleet, with the average age of U.S. cars on the road about 11 years old.

“Incoming indicators are really consistent with a rebound in the economy,” said Ellen Hughes-Cromwick, Ford’s chief economist. “We’ve seen good improvement in manufacturing activity. Consumer sentiment has been in good stead, and incomes are gaining ground.”

The year got off to a bumpy start with U.S. sales in January and February falling short of expectations due to severe winter weather across the Midwest and East. Auto sales picked up in late March and April, then surged in May, climbing 11% over a year earlier.

“We had an absolutely extraordinary May, and the good news is we had a strong June too,” said Beau Boeckmann, president of Galpin Motors Inc., which owns stores in southern California. “We’re continuing to see momentum in the industry and very positive signs.”

GM said it had its best June in seven years, selling 267,461 vehicles. The 1% increase was mostly driven by higher demand for its new large SUVs, fleet sales and a double-digit gain in its Buick brand.

But sales of some models that faced stop-sales orders and recalls were lower. Chevrolet Cruze sales fell 21% amid a temporary halt to sales on some models. Malibu and Impala sales also fell 24% and 17%, respectively, while Cadillac passenger-car sales were down across the board.

Demand for pickups was uneven for the month. Chrysler’s Ram was the only big brand to report a gain. GM’s Silverado brand was flat and GMC Sierra sales fell 7%. Ford’s F-series fell 11% over a year ago.

Ford’s overall sales were 221,396, with its passenger-car sales off 1% over a year earlier.

Chrysler, which expanded an ignition-switch recall this week, sold 171,086 total vehicles in June for a 9% increase over the same month last year.

Truck and SUV sales, which made up 77% of total Chrysler sales in the month, improved 22%, while car sales fell 19%, hurt by double-digit declines in its Chrysler 200 and 300 sedans.

Toyota said it sold 201,714 vehicles last month in the U.S., topping analysts’ expectations. The company cited double-digit gains in its recently redesigned Corolla and Camry cars.

“Sales in the first half of 2014 indicate a steadily recovering industry, and we expect this pace to increase as we move into the second part of the year,” said Bill Fay, Toyota division group vice president and general manager.

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Sales Pick Up in Late May

BANDON, OR — The first 15 days of May showed a modest 6% increase in vehicle deliveries, but the pace picked up toward the end of the month, according to CNW Research. The firm said deliveries were on pace to increase 11% from a year ago.

CNW pointed to a decrease in its Jitter Index as a reason (down .73% from April and down 1.12% from a year ago). It measures consumer sentiment regarding home-centric economic issues. “Americans are less jittery about their home-centric plight than either last year or last month — a positive sign that they are willing to open the bank vault and spend a little more,” wrote CNW’s Art Spinella in the firm’s monthly newsletter.

Another positive sign, the firm noted, was the 7.6% increase in dealership visits. “And those walk-ins are clearly qualified buyers,” Spinella wrote, noting that closing rations were up 14.4% from a year ago and up 1.4% from April.

The firm did note that subprime approvals were down 7.8% from a year ago, but on a month-over-month-basis, approvals appeared to edge up. “The average FICO score of those who bought a new vehicle in the first half of May stood at 641.8 compared to 645.2 a year ago,” Spinella wrote. “Financial institutions are cracking open the approvals for slightly less qualified shoppers.”

The average MSRP for vehicles sold in May topped $38,300, a 1.2% gain. Transaction prices, however, were depressed by 0.6%. The reason, Spinella noted, were total discounts — including manufacturer incentives and dealership spiff to consumers from profits — increased more than 10% vs. one year ago.

According to the firm, manufacturer per-unit incentives, including lease promotions, loyalty programs, dealer incentives, added equipment and more, topped $4,600. “That’s a 3% jump just since last month and plays an important role in the strength of the May sales figures,” Spinella noted.

“As we pointed out two months ago, this spring and summer should provide great sales environments,” Spinella added. “What will be interesting is to see the GM sales figures considering all the recall coverage.”

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Your Previous Customers Are Great Prospects

Remember the facts, and share them with your dealers:

  1. 71% buy because they liked their salesperson.
  2. 78% would buy where they have their vehicle serviced.
  3. 50+% will be product loyal.
  4. 30% have a family member who will be buying or trading a vehicle within the next 90 days.
  5. Each family will purchase 36 vehicles on average.

These customers should be extremely easy sales, especially if you’ve been in regular contact with them. If your dealers understand the stats, their ‘probabilities’ in sales increase enormously. Let’s say they have been selling for five years, and sell 12 units per month. That means they have 720 previous customers who already know them and that they can start contacting today. If they make just five calls every day to previous customers, that’s 25 contacts per week and 100 contacts per month. At that rate, it’ll take them 7 months to contact all 720.

Make sure your dealers remember that, on prospecting calls, no matter who answers, it’s a contact. Reaching Bob or Betty isn’t a requirement of the call. They aren’t calling to talk to only one specific person, they are prospecting with anybody who answers the phone. That means every time someone answers, it’s their opportunity to work prospecting questions into the conversation.

And since 30% of those prospects have a buyer in the family now, that’s 30 buyers they will bump into each month just by making five 5-minute prospecting calls to previous customers every day.

Five 5-minute calls per day = 25 per week = 100 per month.

Multiply that by 30% who have a family member ready to buy in 90 days = 30 buyers every month your dealers will talk to = 360 buyers they will talk to every year, just by making prospecting a priority.

No sales person can bump into 360 buyers every year and not sell more cars, and in turn sell more F&I products. The best part of prospecting with sold customers is the majority of them are not price shoppers. They’ll come back in to the dealership to see a specific salesperson because they like that person and the product, and because they’re having their vehicle serviced there.

This is also especially true when you get them interested in coming into the dealership before they’ve started actively looking for a new or used vehicle. It’s a win for everyone in the dealership when the sales team is bringing in more customers, so get them started prospecting today.

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