U.S. Auto Sales May Reach 10 Million Pace This Month

Bloomberg, July 24, 2009
Alex Ortolani

U.S. sales of cars and light trucks may reach a 10 million annual pace in July for the first time this year, helped by a $1 billion government program to get less fuel-efficient vehicles off the road.
The so-called "cash-for-clunkers" program "is being viewed by automakers as having the potential to drive a meaningful uptick in sales over the final week of he month," Rod Lache, a New York-based analyst at Deutsche Bank, wrote in a report yesterday. He estimated a 10.2 million sales rate.
The pace has been no higher than 9.9 million in any other month this year, as the recession damped consumer confidence and credit tightened. The federal program, implemented today under a law that took effect July 1, provides a credit of as much as $4,500 for buyers who trade in older vehicles to be scrapped for new models with higher fuel economy.
Edmunds.com, an auto-information provider, and market-research firm J.D. Power & Associates also estimated that the July pace will top 10 million, which would be a sign that sales are coming off a bottom. Automakers sold 13.2 million vehicles last year, and averaged 16.8 million from 2000 through 2007.
General Motors Co., Ford Motor Co., Toyota Motor Corp. and other automakers will report July sales on August 3. The June seasonally adjusted rate was 9.7 million.
The July pace may be almost 10.5 million, Edmunds.com estimated in a statement yesterday. The Santa Monica, California-based firm cited "glimmers of hope in the economy" and the cash-for-clunkers effort.
"The program will boost automotive sales and remove some of these vehicles that need to come off the road," said Rachel Richards, vice president of retail strategy for dealership owner Sonic Automotive, Inc. in Charlotte, North Carolina.
Sonic, the third-largest U.S. auto retailer, will soon introduce a Web site to explain the federal program to consumers and will work with the company's dealerships on how to administer it, Richards said in an interview today.
"There are a lot of steps that automotive retailers need to handle to make sure they get their money from the government," she said.
J.D. Power estimated a 10 million rate and credited an increase in sales to fleet customers such as rental-car companies and government agencies. The firm, based in Westlake Village, California, based its projection on sales data through July 15 from more htan 10,000 dealerships.
The federal program has "potential for increased sales in the short term" as some automakers boost incentives to match the government credit, J.D. Power said today in a statement. Chrysler Group LLC announced such offers on July 22.
"Many consumers don't understand the specifics of the program," and sales to individuals this year may be "only incrementally affected," said Gary Dilts, J.D. Power's senior vice president of global automotive operations.
J.D. Power and Edmunds.com both had predicted that the rate for June would exceed 10 million.