February was a banner month for auto sales. The whole industry was up 27% for February and up nearly 23% year-to-date compared to last year. General Motors (!) showed impressive gains, rising 46%. Even GM’s passenger cars, which used to be a real weakness with them were showing strength, rising 40% compared to last February sales. Incentives drove some of that demand, especially on the truck side as the company had as much as $5000 on the hood of many of its trucks and SUVs during February. As much as GM has wanted to show the world that they are back and better than ever, the large incentive number, especially on trucks, leaves an odor of staleness and leads me to believe that the ship hasn’t said completely free through the icebergs just yet. As the economy begins to pick up steam and customers get more confident in making large purchases, we’ll see if they – and the rest of the industry – can resist the industry crack known as incentives and sell cars based on true consumer demand.
All of the large volume OEMs had a great February, but Chrysler is still bringing up the rear; their sales “only” increased 13%. There was a time when the company would KILL for a 13% year-over-year gain and be happy to have it. But, when nearly every other volume manufacturer is throwing up 20, 30, 40-percent plus gains, 13% seems a little underperforming. The company is still refreshing its product line up after the lack of any real progress while under private equity ownership (pre-Fiat). Sergio Marchione has done a yeoman’s job in actually delivering real products to the marketplace for dealer to sell. I expect that Chrysler’s momentum will accelerate as the year progresses.
The most impending threat to improving car sales could be the price of oil. With unrest spreading in the Middle East, and uncertainly about how Saudi Arabia will deal with the wave of revolution that is sweeping other Arab and north African countries, commodities traders are already factoring in the risk of possible shipment disruptions if the unrest intensifies and/or spreads. And then again, it could be a great thing for some manufacturers. Those that are poised with fuel efficient vehicles, like the Ford Fusion and Fusion Hybrid, Nissan’s Leaf and the Chevrolet Volt could take advantage of the shifting consumer attitudes as gas prices creep towards $5 per gallon. Right now, fuel is about $3.50 a gallon and people seem to have adjusted to that. But a sudden spike in prices could lead people to more aggressively seek alternatives.
So, has the industry turned the corner? A lot of folks here in Detroit are excited because the Detroit 3 (GM, Ford and Chrysler) are showing real signs of life after their near death experiences, but there is way too much uncertainty in the economy and consumer behavior to truly feel like the industry is on its way.
February’s results are progress. Great progress, for sure. But, not enough progress to say we’ve turned the corner. Let’s just keep putting one foot in front of the other and see where it take us.
Until next time, drive hard, because life is short.