Auto Sales Up Heading Into 2012

 |  Includes: F, GPI, NSANY, SAH
by: Sageworks, Inc.

By Mary Ellen Biery, Contributor

Auto sales should keep on trucking into 2012, according to some industry experts, and that could help private and public auto dealers in the coming year., a car-shopping website, recently reported that November’s stronger pace of auto sales reflected shoppers returning to the car-buying market after production shortages tied to the Japanese earthquake. Edmunds also said the trend is expected to continue into 2012. Year to date, sales of passenger cars and light trucks are up 10.4 percent from a year earlier, according to market research firm Autodata Corp.

“ estimates that the ‘lost’ summer sales could total nearly 300,000 units and that roughly 100,000 have been made up to date,” said Chief Economist Lacey Plache.

As a result, this mini-bubble should support sales well into the first quarter of 2012. New sources of consumer motivation will then have to emerge in order to maintain the accelerated sales pace.

Not surprisingly, auto dealers’ sales have also benefited from positives sales trends, which analysts say are driven by pent up demand, discounts and the fact that the average age of a U.S. vehicle is around 11 years, according to auto market research firm Polk.

Several publicly held auto dealers have reported sales increases this year. Sonic Automotive Corp. (NYSE:SAH) said new and used-vehicle sales contributed to its 15 percent increase in sales in the nine months ended Sept. 30. Group 1 Automotive (NYSE:GPI) has generated a 6.7 percent increase in same-store revenues through the nine months ended Sept. 30, compared with a year earlier.

Major auto makers including Ford (NYSE:F), Nissan (OTCPK:NSANY) and Chrysler reported double-digit increases in November sales, prompting published reports of the industry’s fastest sales pace in more than two years.

Ford reported its November U.S. retail sales increased by 20 percent versus a year ago with total sales up 13 percent. Nissan reported sales increase of 19.4 percent due to strong sales of the new Versa, Altima, Rogue and Infiniti G. Chrysler posted some of the strongest growth with sales up 51 percent - the best November sales for the Chrysler brand since 2008.

Privately owned auto dealers are seeing similar growth. We performed a financial statement analysis of privately owned auto dealers and found that average sales have rebounded strongly since 2008 and 2009. Dealers generated a roughly 15 percent sales increase in 2010 over the previous year, and the strength has continued, according to our data. From early December, sales at the private auto dealers that we analyzed are an average 15 percent higher than a year earlier.

Interestingly, hefty discounts and manufacturer incentives helped maintain consumer interest even on Black Friday, said data analytics firm Dataium, which monitors online shopping for autos. Shopper traffic to auto sites was down only about 6 percent from a typical Friday and was far stronger than a year earlier, when online shopping traffic plunged 200 percent, the firm said. “It was surprising,” said Dataium CEO Eric Brown in an interview Wednesday. “There was some conversation in the market and some marketing done prior to [Black Friday] around the idea that Friday would be a good day for consumers to find value, and so some of that worked.”

Aging vehicles are also prompting people to shop, though Brown said many are buying used vehicles as replacements. But he also believes the stronger online shopping traffic for autos is a broader sign about the overall economy – “that consumers are starting to get their legs back as far as confidence about their future,” he said.

Online shopper behavior tracks very closely with sales volume, Brown said, with auto sales typically reflecting shopper traffic trends 30 to 60 days out.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.