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Auto Sales Are Soaring, Propelled by Leases

September 4, 2013 by

In August, automakers reported another month of double-digit increases, selling 1.5 million vehicles, a 17 percent gain over the same month last year. That puts the seasonally adjusted annual industry sales rate at a postrecession high of 16.09 million, up from 14.49 million a year ago.

It is a promising sign for the industry, which has steadily increased production throughout the year to meet rising demand.

“Attractive low lease payments have proven very effective at getting new-car buyers back into the market,” said Jessica Caldwell, a senior analyst at the industry researcher Edmunds.com.

In 2013, leasing has accounted for 26 percent of new-vehicle purchases, according to Edmunds.com. In the years before the recession, leasing accounted for 16 percent to 20 percent, with activity focused on high-end cars and trucks.

General Motors, the nation’s largest automaker, has reaped the rewards. On Wednesday it said that its August sales rose 14.7 percent, its strongest month since September 2008. Ford Motor Company, which has taken a more conservative approach on leasing, posted a rise of 12 percent, and the Chrysler Group, 11.5 percent. For all three companies, the increases were led by a mix of small and midsize cars and trucks.

Auto dealers also point to the revival in leasing, which slowed in the recession as G.M. and Chrysler worked through bankruptcy, as a factor. “Leasing has made an amazing recovery,” said Kirt Frye, president of Sunnyside Automotive Group in Middleburg Heights, Ohio. Higher residual values, thanks to a robust used car market, and record low interest rates mean lower monthly payments for buyers with good credit.

The average monthly lease payment was $408, down from $416 last year, according to Experian Automotive, which analyzes automotive data.

At Sunnyside, leases make up one out of three vehicles sold at the dealership’s Chevrolet, Toyota, Honda and Mitsubishi marquees, Mr. Frye said. That rate is up from one out of five vehicles sold 18 months ago.

The dealership’s luxury Audi brand continues to sell about 60 percent of its vehicles through leases, which is in line with the high-end automaker’s usual business. But the real growth in leasing has come from the $199 monthly payments offered regionally this summer on the Chevrolet Malibu, Honda Accord and Toyota Camry midsize sedans, Mr. Frye said.

“I think that with the $199 price point, people say, ‘Yeah, I see the value there,’ ” Mr. Frye said.

The strategy appears to be working. In the highly competitive market for midsize sedans, Toyota sold 44,713 Camrys last month, a year-over-year increase of 21.8 percent. Honda Accord sales rose 10.8 percent, to 38,559 vehicles. The Chevrolet Malibu trailed larger competitors, selling 16,890 vehicles, but increased monthly sales 16.5 percent.

All four of G.M.’s brands showed double-digit sales increases in August. Cadillac posted the largest growth, with sales rising 38 percent; it was the best monthly showing for the brand since 1989. Buick’s sales jumped 37 percent, the strongest results in a decade. Sales of the automaker’s GMC brand jumped 14 percent, and its Chevrolet brand rose 10 percent.

“Our transformed lineup of cars, trucks and crossovers is performing very, very well,” said Kurt McNeil, G.M.’s vice president of United States sales operations.

Ford reported its best month for retail sales since August 2006. The midsize Fusion had good gains after Ford increased production at its Flat Rock assembly plant. Sales of its small cars, like the Fiesta subcompact and C-Max, rose 30 percent, while sales of the F-Series increased 22 percent.

Article source: http://www.nytimes.com/2013/09/05/business/us-auto-sales-gained-in-double-digits-in-august.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Global Carmakers Wrestle With India Slump

April 18, 2013 by Leave a Comment

India’s slowing economic growth, high interest rates and rising fuel prices have led to the biggest slump in the car market in more than a decade. Sales having fallen 7 percent in the financial year that ended last month. But automakers like Honda, which is investing almost $500 million in India, say they are unconcerned because they are in it for the long haul.

“If there was any worry, we would never have done this,” Hironori Kanayama, the head of Honda’s India unit, said in an interview in Mumbai. “Of course it’s a pity that the economy is sluggish, but it doesn’t worry us at all.”

Honda said this month that it would spend 25 billion rupees, or $463 million, to double its output capacity in India to 240,000 cars per year by next year.

“The potential is very high here,” Mr. Kanayama said. “Our investment is based on such long-term projections.”

Honda is not alone in expanding despite the slumping market. Ford is spending $1 billion on a new factory in India, even as its current plant runs at only 60 percent of capacity. Maruti Suzuki India, controlled by Suzuki Motor of Japan, is spending about $750 million to add the capacity to make an additional 250,000 cars annually.

Carmakers say India’s huge population, low penetration of car ownership and rising incomes mean sales can only go up in the long run, while the opportunity to export to Africa and the Middle East makes for a compelling investment case.

“Clearly we believe the macro conditions are a short-term blip,” said Nagesh Basavanahalli, managing director in India for the Italian carmaker Fiat and its Chrysler unit.

Mr. Basavanahalli, who began in his current role this month, has been assigned to try to reintroduce the Fiat brand and introduce the Jeep and Abarth model lines in India, even as established names like India’s own Tata Motors see sales plummet.

“Are there challenges? Yes,” he said, but he added that he was “very confident, based on the product plan that we have and based on the actions we are taking.”

Not everyone shares that confidence in the Indian market. For example, last year, Peugeot of France shelved a plan worth €600 million, or about $790 million, to build a factory in India.

For its part, Honda is not just investing in manufacturing capacity. The Japanese carmaker introduced a new sedan model last week and, like other companies, is adding diesel-powered options as it races against global rivals to tap market segments that are still growing, even as overall demand falls.

Government subsidies make diesel less costly than gasoline in India.

Customers hit hardest by the economic gloom in India have been first-time buyers and the emerging middle class, which relies on bank loans for big purchases, analysts say. Sales of small cars, which account for more than 70 percent of the market, have fallen about 10 percent.

By contrast, demand for sport utility vehicles and midlevel diesel cars has risen, with models like the diesel Dzire from Maruti Suzuki and the low-cost Duster S.U.V. from Renault helping their companies outperform rivals. The new Honda Amaze sedan, which starts at 500,000 rupees, is in a segment in which sales were up 21 percent in the most recent financial year.

Ford, Fiat-Chrysler, Maruti and Honda are all preparing to introduce compact S.U.V.’s.

Companies that lack models in those segments are suffering the most. Volkswagen, whose shortcomings in India are a blot on its global success, built 66,699 cars in the country in the past financial year, using no more than 31 percent of its manufacturing capacity there, according to a report by Kotak Securities.

Sales at the Indian unit of General Motors fell 20 percent by volume in the financial year that just ended, and it lost 7.46 billion rupees in the fiscal year that ended in March 2012.

Some of G.M.’s rivals are working to increase exports from their less-than-stretched Indian production lines to offset the local sales slump. Volkswagen nearly tripled exports from India last year, and Ford now exports almost a third of its Indian-made cars.

Long-term estimates vary, but many industry analysts expect annual car sales in India to reach six million by 2020, at which point it would trail only China and the United States in sales volume. The Society of Indian Automobile Manufacturers, the industry’s primary lobbying group, has estimated sales of nine million by that year.

Optimists say a young, fast-urbanizing population, rising incomes and an expected rebound in the country’s economic expansion rate will drive the market’s future growth. In addition, paltry ownership levels of about 12 cars per 1,000 people — about a quarter of China’s rate — indicate lots of room for growth.

“The entire structural story of India’s car potential still holds true, despite the current cyclical downturn,” said Jinesh Gandhi, an automotive equities analyst at the brokerage firm Motilal Oswal in Mumbai. “I would clearly invest in new capacities for the future, rather than wait for the market to turn around.”

Article source: http://www.nytimes.com/2013/04/19/business/global/global-carmakers-wrestle-with-india-slump.html?partner=rss&emc=rss

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Concerns About Politics Overshadow an Auto Show

March 6, 2013 by Leave a Comment

GENEVA — Such is the state of the European car industry that one of the main topics at the Geneva auto show on Tuesday was the political situation in Italy. While automakers continued to show new models with extravagant events, almost everything is overshadowed by the economic crisis in Europe and the risk that political turmoil in Italy will undermine any recovery.

Elections last month, which gave no party enough votes in Parliament to form a stable government, have added another element of uncertainty in the euro zone and helped discourage expectations that the car market in Europe could begin to recover as early as this year from its worst crisis in almost two decades.

“The country is not being governed. This is something that worries me a lot,” said Luca Cordero di Montezemolo, the chairman of Ferrari and one of Italy’s best-known business leaders. The strong showing by protest parties means “the decision by voters was not to take care of the future,” he said.

Not that Ferrari sales are much affected. Mr. di Montezemolo said that there was already a surplus of people willing to pay the sticker price of 1 million euros, or $1.3 million, for the limited-edition supercar, called simply LaFerrari, that the company introduced Tuesday. Only collectors who already own another Ferrari will be allowed to buy one of the 900-horsepower, hybrid models, Mr. di Montezemolo said in an interview.

LaFerrari drew unusually large crowds even by Ferrari standards, Mr. di Montezemolo said, perhaps because it offered a distraction from the gloom prevailing elsewhere.

Outside Ferrari, the only point of debate among car executives here was how long the slump in Europe would last and whether it could get any worse. New-car registrations in the European Union fell 8.2 percent last year, to 12 million vehicles, the lowest since the mid-1990s.

The relative optimists, including Stephen T. Odell, president of Ford in Europe, said they saw a chance that 2013 could be the low point.

“It feels like we could be in the trough,” Mr. Odell said in an interview. He noted that surveys have shown business people are becoming more optimistic, but added there was little hard data to support his gut feeling that the worst was almost over.

Sergio Marchionne, the chief executive of Fiat and Chrysler, was also cautiously upbeat. “My expectation is that we will see a recovery in 2014 of some fashion once Europe gets its act together,” he said.

Mr. Marchionne, whose company is the largest private employer in Italy, said he had met Tuesday with Giorgio Napolitano, the Italian president, who is responsible for mediating among the parties in Parliament. “I am confident Napolitano will have the wisdom and know-how to shepherd the country through the next phase,” Mr. Marchionne said during a news conference in Geneva.

As has happened in the United States, European car owners will reach a point where they have to replace their old vehicles. After five years of declining sales in Europe, that point could be near, said Stephen Girsky, vice chairman of General Motors and overseer of the company’s European unit, Opel.

But other auto executives were far more pessimistic. Carlos Ghosn, chairman of the Renault-Nissan alliance, said that European car sales have already declined more so far this year — by 8.7 percent in January compared with those in the month a year earlier — than most analysts had forecast. And the downturn has begun to spread beyond the crisis countries in southern Europe, Mr. Ghosn said.

“Europe is going to be a very tough market for a while,” he said at a news conference, adding that the slump could last until 2016.

Even when the European market does recover, it will look a lot different than it did in 2007, when the crisis started. New European restrictions on carbon dioxide emissions, a response to global warming, mean that carmakers must spend billions of dollars developing new technology. Mr. Marchionne said it might be difficult to pass that cost to buyers.

Article source: http://www.nytimes.com/2013/03/06/business/global/politics-steals-the-show-at-geneva-car-event.html?partner=rss&emc=rss

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French Government Considers Taking Stake in Peugeot Citroen

February 8, 2013 by Leave a Comment

Speaking Friday morning on RMC radio and BFM television, Budget Minister Jérôme Cahuzac said the company “cannot and must not disappear, we have to do whatever is necessary to support it,” possibly with the government’s strategic investment fund.

The company, maker of the Peugeot and Citroën brands, said late Thursday that it was marking down those assets by about €3.9 billion, or $5.2 billion, to reflect “the impact on the group of the deterioration of the European market.” That, and an additional €243 million write-down for what the company called “onerous contracts, will have a direct impact on the bottom line when it reports 2012 results on Wednesday.

The company had valued the automotive assets on its books at €14.5 billion at the end of June. It said the write-downs would “not involve any cash-out, nor will it affect either the group’s liquidity or its solvency.” Nor is it related to goodwill, or the value of intangible assets such as the company’s brand.

Rather, the accounting measure reflects an acknowledgement of “the deterioration of the European market, which is likely to remain at 2012 levels for the foreseeable future.”

Shares of Peugeot Citroën were up 18 cents at €6.05 in early trading in Paris.

Even before the new write-offs announced Thursday, analysts surveyed by Reuters had been expecting a 2012 net loss of about €1.52 billion for the year.

The car market in the 27-nation European Union last year shrank by 8.2 percent from 2011, according to the European Automobile Manufacturers’ Association, bringing new car demand to just over 12 million units, the lowest since 1995.

PSA Peugeot Citroën did worse than the overall market, with deliveries declining 13 percent. The company, the second-largest E.U. carmaker after Volkswagen, is pressured more than many of its rivals by its dependence on European market.

It has already announced plans to close a plant in Aulnay-sous-Bois, near Paris, and hopes to cut 11,200 jobs from its French work force of roughly 97,000 people, mainly by offering early retirement and buyouts. Those restructuring plans were put on hold last week, when a French court ruled that the company had not adequately discussed its plans with workers at an affiliate.

Peugeot also sold a 7 percent stake to General Motors last year; it and the American automaker, which is struggling to turn around its own European unit, Adam Opel, have agreed to cooperate loosely on logistics and on some vehicle projects.

Libération, a French daily, reported Friday without identifying its source that the French government, which owns just over 15 percent of Peugeot’s French rival, Renault, was considering its options regarding Peugeot and might take a stake “as a last resort.” Last autumn, the state extended credit guarantees worth €7 billion to the company’s finance unit, to ensure that potential buyers could still get loans at competitive rates as the company’s own deteriorating balance sheet weighed on its ability to tap investors.

Asked Friday about the possibility that the government would become a shareholder, Pierre-Olivier Salmon, a company spokesman, declined to comment.

PSA Peugeot Citroën said the €3.9 billion depreciation charge included a write-off of about €3 billion on automotive division assets for 2012, as well as an €879 million markdown in the net value of deferred taxes.

The company said there would be another €855 million in write-downs for 2012, including €612 million it has already announced. Taken together, it emphasized, the charges will contribute to PSA Peugeot Citroën’s 2012 net loss “but do not affect its solvency nor its liquidity. The depreciation of these assets has no impact on cash.”

It also said it expected to meet its 2012 target for net debt of roughly €3 billion.

Article source: http://www.nytimes.com/2013/02/09/business/global/peugeot-citroen-takes-5-2-billion-writedown.html?partner=rss&emc=rss

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Ford Turns to the Midsize Car to Challenge Japan

January 9, 2012 by Leave a Comment

But that’s exactly what the Ford Motor Company did with its new Fusion sedan, to be introduced Monday at the annual Detroit auto show.

The current Fusion ranked third in sales among all cars in the United States last year. Yet virtually everything was changed on the version that goes on sale later this year — even how the “blue oval” Ford badge was embedded into the hood of the car.

That attention to detail surprised even William Clay Ford Jr., the company’s executive chairman. “At first, I thought the blue oval was off-center or something,” Mr. Ford said in an interview. “But it’s actually quite beautiful.”

The new look is just one aspect of Ford’s all-out bid to gain share in the competitive midsize car segment dominated in recent decades by the Japanese automakers. To further differentiate the Fusion, the company will offer four engine options, including a plug-in hybrid it promotes as the most fuel-efficient family sedan in the world.

The revamped Fusion underscores just how hard Detroit’s automakers are pushing to solidify their turnarounds with improved passenger cars. General Motors, Ford and Chrysler accounted for 60 percent of trucks and S.U.V.’s sold in the United States in 2011 and make most of their profits from bigger vehicles. But they still have only about one-third of the car market.

That could change if their Detroit show models attract new customers. Besides Ford’s Fusion, G.M. will reveal a new small Cadillac, as well as its own contender in the midsize market, the restyled Chevrolet Malibu. Chrysler plans to show the compact Dodge Dart, which is built off of a vehicle platform developed by Fiat, its Italian parent company.

With Toyota and Honda struggling to recover from last year’s earthquake-related supply disruptions, the conditions are ripe for the American companies.

“With the Japanese in a bit of a bind, the time is now for Detroit to conquest new customers,” said Joseph Phillippi, an analyst with the consulting firm Auto Trends.

Both G.M. and Ford have made big gains in the small-car market with new products like the Chevrolet Cruze and Ford Focus, part of their effort to meet new fuel standards as well as attract people to showrooms. Now they are focusing on the midsize segment, long the stronghold of the Toyota Camry and Honda Accord.

The Camry was still the top seller in the segment last year, followed by the Nissan Altima and the Fusion. But models from the Korean carmakers Hyundai and Kia are steadily gaining share, and the German carmaker Volkswagen is gearing up for more production of its midsize entries.

Honda plans to show a concept version of a new Accord at the Detroit show. But most of the attention will center on the Fusion, which promises to shatter the old Detroit stereotype of bland, middle-of-the-road passenger cars.

The Fusion is the latest Ford car to be overhauled for sale in a variety of global markets, following the Focus and the subcompact Fiesta. Development of the new Fusion began four years ago, just when Ford and the other Detroit companies were spiraling into financial crises which led G.M. and Chrysler into government-sponsored bankruptcies.

At the time, Ford was determined to invest heavily in new, fuel-efficient cars despite the company’s mounting losses. “Even in the dark days, we decided to keep investing,” Mr. Ford said.

Ford’s chief executive, Alan R. Mulally, urged the design and engineering team to reinvent the Fusion rather than simply update it. Traditionally, the Detroit companies often settled for incremental improvements, particularly on the design side.

They were hardly alone in that regard. Toyota, for example, had stellar success with the Camry year after year without changing its basic styling. “Detroit looked at the competition and saw that the plain, white-bread look was what worked,” said Mr. Phillippi.

Yet the Ford team was urged by management to wipe the slate clean for the new Fusion. It was not an easy call. “You can start with a clean sheet of paper, and still screw it up,” Mr. Ford said.

The exterior design staff was headed by Chris Hamilton, a 43-year-old Briton who had spent most of his career in Europe. His team interviewed consumers from the United States, Europe, China and Australia to get ideas.

“We didn’t look at the midsize car as just a boring segment,” Mr. Hamilton said. “We looked at it as an opportunity to create a beautiful product.”

What they ended up with was a muscular-looking, four-door sedan that stands apart from the midsize crowd. And with its trapezoidal grille, elongated headlamps, and sculptured trunk lid, the new Fusion looks nothing like the current model.

During a preview of the car at Ford’s design studio, Mr. Hamilton stressed the changes, both big and small. Chrome accents on the body panels are slimmer than before, and side mirrors are mounted on the doors to allow for larger windows. The roof was stretched and sloped to create a sleeker silhouette. And instead of attaching a standard-issue blue oval badge onto the hood, a slightly smaller emblem was designed and integrated into the sheet metal.

“The proportions are everything,” Mr. Hamilton said. “We want this car to look expensive, even if it isn’t.”

Ford has not announced any prices for the new Fusion, except to say they will be comparable to the current model, which ranges from about $20,000 to $30,000.

There are more changes in the interior of the car, like lighter-weight seats and an unusual center console supported by pillars rather than layers of hard plastic. In addition to a voice-activated communications and navigation system, the Fusion also has sensors that detect when the car gets too close to other vehicles or is straying into other lanes of traffic.

Ford will offer two, four-liter engines in the Fusion that can achieve 37 miles a gallon in highway driving. It also has a hybrid gas-electric model, and the first plug-in hybrid available in the midsize segment. While it has not yet been rated by federal regulators, Ford expects the plug-in to deliver the electrified-vehicle equivalent of more than 100 miles a gallon.

Its striking new design will attract potential buyers, but the technology and fuel-efficiency are critical to the Fusion’s success in the long-run, said James D. Farley Jr., Ford’s head of sales and marketing.

“The family sedan is still the heart and soul of the American garage,” Mr. Farley said. “The design is so evocative that it invites customers to look beyond the surface to our quality and our fuel economy.”

Article source: http://feeds.nytimes.com/click.phdo?i=f9a194b7d16c734f4ce68f07c4453d1f

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