Auto Sales Climb in Turbulent August


Despite turbulence from all sides -- economic concerns, the bloodbath in equities, the plunge in consumer confidence, Hurricane Irene's battering of the East Coast of the U.S. -- auto companies have surprised forecasters with a double-digit rise in sales figures for August.

Come rain or sunshine
General Motors
(NYS: GM) reported an 18% increase in sales from levels a year earlier, helped in part by sales of its recently launched compact car, the Chevrolet Cruze. While retail deliveries were up 22%, deliveries to fleet customers saw an 8% boost. Crossover vehicle sales also went up by 17% year over year for August, while truck sales increased by 18%.

Ford (NYS: F) posted an 11.2% increase in automobile sales for August while sales of SUVs for the month increased by 49%. This was largely due to strong demand for Ford's Escape and Explorer SUVs, which rose by a staggering 38% and 300%, respectively.

Chrysler, on the other hand, posted an impressive 31% increase in sales, its best August figure in the last four years. Sales of cars rose by 23% and light truck sales increased by 33%.

Volkswagen Group of America witnessed a 10% rise in sales.

Nissan Motor's vehicle sales also saw a 19.2% increase in August against the same month a year ago; this year so far, the company has been able to clock a 13.6% increase from 0.60 to 0.68 million vehicles. August car sales for the company increased by 21.7%, while light truck sales increased by 15% from last year.

Running on fumes
Unfortunately for Japanese carmakers Toyota (NYS: TM) and Honda (NYS: HMC) , sales took a nosedive. For Toyota, sales figures plummeted 13%, while Honda's sales fell by a staggering 24%. This was by and large due to inventory shortages in key models that the two companies faced after the earthquake that recently shook Japan.

Production at Toyota's North American plant was cut due to the resulting supply chain disruptions, but company officials said in June that they expected to touch peak production levels by this month. According to company officials, Hurricane Irene also hammered Toyota's East Coast dealership sales by almost 2,700 units over the storm weekend.

The largest auto dealer in the U.S., AutoNation (NYS: AN) , actually reported a 3% drop in sales on the back of sliding imports sales due to the Japanese disaster.

Steady consumer appetite
Unfazed by an uncertain economic environment coupled with extremes of volatility in the stock market, consumers still bought cars in the month of August. Moreover, sales for the current year have witnessed an overall rise. Although consumers are being cautious, at the same time they are not entirely cutting back on high-value purchases.

Trying to catch up
Though GM's and Ford's sales rose, auto manufacturers have been struggling to keep up with the spurt in demand for their compact car models, mainly the Chevrolet Cruze and the Ford Focus.

In order to meet the demand, GM workers are putting in overtime at the Ohio-based plant; Ford has claimed that it would boost production for the fourth quarter by 9% from the previous year's quarterly production numbers.

The Foolish bottom line
Automobile sales for August might have increased from the same month last year, but sales have been flat throughout the summer. The consensus among analysts is that the surge in sales came in large part because consumers felt the need to buy newer cars after holding on to their old ones for a long time during the Great Recession. To add to this, the general rise in gas prices has led to the need for newer fuel-efficient cars, which would in turn drive automobile sales further.

Things seem to be looking up for the auto industry for the time being. But in order to boost growth, automakers would have to ramp up promotional and advertising activities to lure consumers who still feel reluctant to make big purchases. For now, I am cautiously optimistic with regard to the auto industry, mainly because economic conditions continue to look dreary.

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At the time thisarticle was published Keki Fatakia does not own any shares of the companies mentioned. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter serviceshave recommended buying shares of Ford Motor and General Motors. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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