August auto sales: Glass half full or half empty?

Despite volatility on Wall Street and predictions it would impact the automotive industry, US auto sales in August were up 7.5 percent from the same month one year ago.

Analysts and industry executives both agree that the uptick in sales is the result of consumers needing to buy after holding onto their old cars for longer than expected, plus the rollout of new, more fuel-efficient models that offer a desirable alternative in the face of the recent hike in gas prices.

But while the August numbers marked an improvement over 2010, they continued a summer of flat sales. For the industry to post a second consecutive year of growth after four of decline, it might have to lure more consumers with incentives this fall, some experts say.

Overall, unit sales for cars and light trucks in August reached 1.1 million, according to Autodata, up from 997,467 unit sales in August 2010. Among the domestic automakers:

• Chrysler made the greatest gain, up 27.5 percent to 127,013 units sold. The company credits sales of its Jeep brand, which was up 58 percent in August. The company also spent heavily on incentives, such as a 90-day, zero-payment promotion for certain Chrysler, Jeep, Dodge, and Ram models.
• Ford Motor Co. sales increased 11 percent
• GM sales increased 18 percent.

Overall, domestic sales increased nearly 18 percent from a year ago.

Asian manufacturers told a different story, as devastation caused by the March 11 earthquake and tsunami continue to take a toll on production.

Toyota’s US sales dropped 12.7 percent in August compared with a year ago, while Honda sales fell 24 percent. Total Asian sales fell 2.4 percent to 456,901 units, while total European sales increased 8.9 percent to 95,090 units from August 2010.

Even with the double-digit, year-on-year sales gains on the domestic side, however, total industry sales in August dipped fractionally from July and slightly more from June. One reason why sales have remained relatively flat this summer is that the industry is spending less on incentives.

The summer decline, plus the drop in production from Japan and US debt downgrade, prompted many industry analysts to trim their year-end forecasts. “There’s a lot of turmoil in the business and turmoil means uncertainty,” General Motors CEO Dan Akerson told reporters last month in a conference call.

Most agree the last three months of the year will be pivotal to continuing momentum from 2010, in which the industry posted its first sales gain since 2005.

For the industry to boost sales in the final months of this year, it will have to spend more to motivate consumers to buy, because economic uncertainty is holding customers back, said Kristen Andersson, an automotive analyst at TrueCar.com, in a statement.