For Automakers, 2010 Marks the Road to Recovery

Toyota hopes sales incentives will bring customers back in 2010 despite recallsAfter a disastrous 2009, many in the auto industry are counting on 2010 to signal a return to better days. Having routinely sold 16 million or more cars annually starting in 1999, manufacturers last year saw sales plummet by about a third to a little over 10 million.

Not since recession-plagued 1982 has the U.S. seen so few cars sold.

And while 2010 promises to be a bit better than last year, projections compiled by IHS Global Insight show that this year is still likely to go down as one of the lowest sales volume years since the end of World War II. Christopher Hopson, an IHS analyst, expects automakers to sell just 11.8 million cars in 2010.

That's ahead of 1982 but behind 1983 when, lest we forget, U.S. manufacturers still dominated the domestic auto market. IHS doesn't expect demand to return to pre-recession levels until 2013.

In recent decades, Asian automakers have made strong inroads in the U.S., building loyalty among American car buyers who valued fuel economy, quality and safety.Toyota Motor (TM) was chief among the beneficiaries of that trend, supplanting Ford Motor (F) as the U.S.'s No. 2 auto company and threatening to topple General Motors from its top spot. Currently, of course, Toyota is mired in a messy and expansive recall involving many models, including its popular Camry, Corolla and Prius hybrid sedans.

Toyota Customers Stay Loyal

Still, analysts say while recalls have dulled Toyota's quality image somewhat, buyers are staying loyal. Projected March sales figures show Toyota's sales are on target to jump 80% from last month, in part due to generous incentives, according to

"At this point, Toyota seems to be making large strides in reinstating its good name and appealing to car-shoppers," says Jessica Caldwell, director of industry analysis for the online car-buying guide.

February was a particularly tough sales month for the Japanese automaker, which saw sales drop 20% from a year earlier. Toyota halted sales and production of eight models early in the month as it scrambled to develop a fix for complaints of "sticky" gas pedals. Broadcast images of apologetic Toyota officials attempting to explain the company's quality woes to outraged members of Congress did little to help sales.

Compared to March 2009, Edmunds expects Toyota sales to rise nearly 32%, after adjusting for fewer sales days during the month.

Shifting Market Shares

The world's largest automaker isn't the only manufacturer expected to record higher March sales. Honda Motor (HMC), Ford, GM, Hyundai/Kia and Nissan are all expected to show double-digit increases. Ford sales are expected to jump 55.5% from a year earlier. Only Chrysler Group, run by Italy's Fiat, is likely to see sales fall, Edmunds says, with 6.5% fewer vehicles sold than last year.

Despite the resurgence in Toyota sales, analysts predict it will place third in the U.S. market, just behind Ford, when total 2010 sales pass into the history books. Ford is expected to sell some 1.9 million cars, accounting for 16.5% of the market, while Toyota will likely garner 16% to 16.4% of sales on volume of 1.8 million vehicles. GM will probably maintain its top spot, with 18.1.% to 19% of the market.

Among second-tier manufacturers, Honda is expected to sell about 1.3 million cars and trucks in the U.S. this year, giving it a little more than 11% of the market, while Chrysler is predicted to sell just under 1 million vehicles, or about 9% of the market.

Rounding out the largest suppliers to the U.S. auto market are Hyundai/Kia (counted as a single supplier for sales purposes since both are owned by the same parent company) and Nissan Motors. Those two will duke it out for sixth place, each accounting for just under 8% of the market, or about 900,000 vehicles sold.

Gains at a Cost

Toyota's gains in March may come at a cost, however. Generous incentives, such as zero-interest loans, that the automaker has deployed to counter concern about recalls may eat into future months' sales, according to James Bell, executive market analyst at Kelley Blue Book. "Our view is these buyers are either Toyota loyalists or bargain-hunters," he told

Still, Bell said, Toyota's resources allows the company to keep incentives in place until its recall woes are further behind it. In the meantime, other auto companies are likely to stay competitive and match Toyota's offers. That's a boon for recession-weary U.S. consumers, who have become experts at sniffing out bargains.
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