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U.S. auto sales set to maintain hot pace in July

A woman walks by vehicles for sale at a Toyota dealership in Pasadena, California October 10, 2012. REUTERS/Mario Anzuoni
A woman walks by vehicles for sale at a Toyota dealership in Pasadena, California October 10, 2012. REUTERS/Mario Anzuoni

By Ben Klayman

DETROIT (Reuters) - Long Island car dealer Gary Brown is enjoying the summer heat brought on by consumers' increasing demand for new cars and trucks, and like the rest of the industry, expects sales in July will continue the trend.

"We're still on fire," the owner of Brown's Jeep Chrysler in Patchogue, New York, said. "We're going to be up over June and we're going to beat last year by 10, 12 percent or so. There's a lot of demand in the market place."

Partly driven by an improving housing market that has boosted demand for full-size pickup trucks, U.S. auto sales in July are expected to rise 14 percent to 16 percent when automakers report results on Thursday. Research firm Edmunds.com forecasts the strongest July sales since 2006.

Analysts polled by Thomson Reuters expect the annual sales rate in the month to hit 15.8 million vehicles, which would be the second best performance of the year after June's 16 million.

"Stability is really the story," TrueCar.com analyst Jesse Toprak said. "I know it doesn't make a great headline."

Monthly sales are regarded as an early indicator of the U.S. economy's health. The industry has held up better than the broader economy because of easier access to credit and consumers' need to replace aging vehicles, which now average more than 11 years.

Adding to the optimism, the Commerce Department on Wednesday said U.S. economic growth unexpectedly accelerated in the second quarter.

In June, new-car sales rose 9 percent, racing to the industry's strongest monthly pace since late 2007 as the stronger housing market drove demand for brawny pickups. Sales of big trucks have grown three times faster than the overall sector.

Brown also pointed to newer vehicles with better technology as helping to lure buyers into showrooms. In his dealership, the new Jeep Grand Cherokee SUV is flying out the door. "We just can't get enough of them."

With the smaller Jeep Cherokee launching in September, Brown sees things only getting better and he is hiring more people. It's that kind of demand that has some analysts raising their industry sales forecasts for the year.

LMC Automotive and Kelley Blue Book both raised their industry forecasts for the year to 15.6 million vehicles, which would be up from 14.5 million last year. They had previously expected 15.4 million and 15.3 million, respectively. TrueCar raised its forecast last month to 15.7 million.

"With a strong tailwind, it is not unreasonable to think about a 16-million-unit level of demand in 2013," LMC senior vice president Jeff Schuster said.

Demand for trucks, compact cars and crossover vehicles has fueled the strong year so far and that is expected to remain true in July, analysts said. Ford Motor Co said on Wednesday that its Escape was the first small SUV to top 150,000 sales in the first half of the year and was on pace to break last year's record sales of 261,008.

Strong pickup demand is particularly good news for U.S. automakers, who dominate that sector and reap large profits from those vehicles. Chrysler Group launched a new version of its Ram pickup last fall, while General Motors Co started selling its redesigned Chevrolet Silverado and GMC Sierra trucks in June.

U.S. automakers are expected to show strong gains in July, with analysts seeing sales at GM rising in a range of 8 percent to 23 percent thanks partly to the new pickups. Analysts see Ford's sales up in a range of 12 percent to 23 percent, and Chrysler up in a range of 10 percent to 20 percent.

Edmunds is the most pessimistic about Ford, seeing Japan's Toyota Motor Corp topping the No. 2 U.S. automaker in sales in a month for the first time since March 2010.

The overall strength in the U.S. auto market coincides with rising vehicle prices, according to J.D. Power and Associates. During the first six months of the year, prices on new vehicles rose 3 percent.

Rising prices are the result of new vehicle designs, but also a newfound discipline among many automakers to refrain from lavishing incentives that hurt resale values.

(Reporting by Ben Klayman; editing by Andrew Hay)

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