Even as dealers sold out of some of the hottest models, U.S. auto sales raced past expectations in August, rising at their fastest pace in nearly six years, while demand showed no signs of cooling as consumers grew more confident in the economy.
Vehicle sales increased 17 percent in August, and the annual sales rate in the month finished at 16.1 million vehicles. That sales pace topped analysts' expectations of 15.8 million and marked the strongest month since October 2007, before the start of the 2008-2009 recession.
Sales easily surpassed expectations as consumers, after years of putting off purchases of new cars, took advantage of still-low interest rates and snapped up a wide range of vehicles from pickup trucks to luxury sedans.
Editor’s Note: 5 Phases of a ‘Retirement Heist’ Exposed (See Video)
Overall retail sales for August, due to be reported in the middle of the month, are currently forecast to have risen 0.3 percent from July, but the robust auto sales could indicate the current estimates are too conservative.
The auto industry has held up a bit better than the broader economy, in part because consumers need to replace aging vehicles after deferring purchases in recent years. On average, vehicles are more than 11 years old, a record.
"People are just tired of waiting," Fred Diaz, U.S. sales chief for the Nissan brand, said on Wednesday. "They need new transportation, and they're feeling confident about the jobs and secure about their careers."
That said, the unexpected strength of August auto sales provides more evidence that the broader U.S. economy is gathering momentum coming out of the first half, when gross domestic product grew by a tepid 1.8 percent.
Mustafa Mohatarem, chief economist at General Motors Co , said the robust sales pace in August "reflects the underlying fundamentals of the economy."
The industry benefited from the pent-up demand even though persistent inventory shortages of some models came to a head in August, traditionally a strong sales month driven by end-of-model-year clearance sales.
In a survey by RBC Capital Markets, 19 percent of dealers said inventory was too low during the month of August, compared with 9 percent of dealers in July and 4 percent in June.
Dealers could not keep pace even though many manufacturers were running their plants flat-out. Ford Motor Co. said it is operating its North American plants at 135 percent of capacity, and six of its factories are running on three shifts.
Among the models in short supply were the Ford Fusion sedan and its Escape crossover, and GM's Chevrolet Cruze, Spark, Impala and Malibu.
All major automakers reported double-digit sales increases in August, with most of them handily exceeding analysts' estimates.
GM, the No. 1 seller in the U.S. market, reported August sales up 15 percent.
Chrysler Group LLC and Ford each said their August U.S. sales rose 12 percent. Both automakers reported that pickup truck models led the way, in part because of the rising housing market. Ford's sales outstripped analyst expectations and Chrysler's matched them.
The three largest Japanese automakers in the U.S. market posted much stronger than expected sales.
Toyota Motor Corp.'s August sales gained 23 percent. For the second straight month, the top Japanese maker sold more vehicles in the United States than Ford, ranking Toyota No. 2 behind GM. Before July, Toyota had not topped Ford in monthly sales since March 2010.
Honda Motor Co. sold 27 percent more vehicles in August than last year, and Nissan Motor Co. sales rose 22 percent.</p><p>"The auto industry continues to be a bright spot in the economic recovery," said Bill Fay, Toyota division group vice president and general manager.
Sales are expected to stay strong through the end of the year, most automakers said.</p>
Vehicle sales have been growing as a proportion of overall retail sales in recent months.
From a post-financial crisis low of 14 percent of all retail sales in September 2009, auto sales more recently have accounted for about 17.5 percent of retail sales. Still, it is a far cry from the peak of a decade ago when auto sales typically represented more than 22 percent of all retail sales.
Michigan-based LMC Automotive expects this year's U.S. sales to finish at 15.6 million vehicles, which would mark a 7.6 percent gain from 2012.
A second bright spot for the industry is the rise in average transaction prices for new vehicles, which climbed to a record $31,252 in August, said TrueCar.com, the California-based research firm.
Incentives across the industry fell in August, to an average of $2,374 per vehicle from $2,455 in July, according to industry research firm Edmunds.com.
The demand for luxury vehicles remains high, as seen by the 46 percent sales gain by BMW, which coming into August was just behind Daimler's Mercedes-Benz as top luxury brand automakers. Mercedes-Benz said its August sales rose 16 percent.
Citi analyst Itay Michaeli said the industry is only at the beginning of satisfying pent-up demand.
Jesse Toprak, analyst with TrueCar.com, said consumers are attracted to showrooms now because of low monthly payments and "the best lease deals ever."
Toprak said he expects the robust sales rate to continue through the end of 2013, and expects fourth-quarter sales to be the strongest of the year.
GM's Mohatarem also said that the sales pace will not fade as the year nears an end.
But Alec Gutierrez, an analyst with Kelley Blue Book, said a shortage of some key models will put a crimp in sales growth for the rest of the year into 2014.
"I don't know if we're going to have the inventory available to have the same kind of growth that we saw this month," he said.
Ford sales analyst Erich Merkle said the auto industry will show a 17 percent U.S. sales gain for August, and a seasonally adjusted annualized selling rate of more than 16 million vehicles.
Before the 2008-2010 industry downturn, it was routine for U.S. auto sales to top 16 million vehicles each year. In a 10-year span ending in 2007, U.S. auto sales averaged 16.7 million vehicles.
Pickup truck sales remained strong in August for the major U.S. automakers, continuing a trend that began almost a year ago.
Ford said it sold 71,115 F-Series pickup trucks, up 22 percent, which matches the line's year-to-date gains.
GM's Chevrolet Silverado pickup truck sales rose 14 percent and through August increased its year-to-date sales 25 percent.
Chrysler's truck brand, Ram, showed a robust 29 percent sales gain in August, and had a year-to-date gain of 25 percent through August. Chrysler is a unit of Italy's Fiat SpA.
Bucking the upward industry-wide trend, Volkswagen AG said its sales were down 1.6 percent in the month.
Ford shares were up 3.3 percent at $16.88 and GM shares were up 4.9 percent at $35.81 on the New York Stock Exchange shortly before the close of trading on Wednesday.
Editor’s Note: 5 Phases of a ‘Retirement Heist’ Exposed (See Video)
© 2016 Thomson/Reuters. All rights reserved.