Auto sales look good for '13, but for the 'cliff'

2 hrs.

Paul A. Eisenstein , NBC News

It?s been a disappointing holiday season for many?retailers, but U.S. car dealers have been busily ringing up sales?as the year wraps up.

If preliminary numbers for December hold up, 2012 could prove to be the industry?s best year since the long recession and painfully weak recovery began. And 2013 is?shaping up to be even better ? unless auto sales fall off the fiscal cliff. ?

?I clearly hope we get some bipartisan effort to avoid the fiscal cliff,? said Ford Motor Co. Chairman Bill Ford Jr. ?It?s vitally important for the economy that we work this out.?

That's true for the auto industry, in particular. After nearly half a decade of struggles, carmakers are ending 2012 on a positive note. November saw demand for new cars, trucks and crossovers surge at a double-digit pace. In fact, a number of makers including Audi, BMW, Honda, Nissan and Porsche are setting all-time sales records for the month. By the end of November, Hyundai had already beaten its previous full-year record set in 2011.

December, meanwhile, is expected to see another gain of around 15 percent, year-over-year, according to a forecast by LMC Automotive. The consulting firm has now upped its final forecast for all of 2012 to 14.5 million and conservatively anticipates another comfortable jump next year.

?The U.S. light-vehicle sales market continues to be a bright spot in the tremulous global environment,? said Jeff Schuster, LMC?s senior vice president of forecasting.? ?The only major roadblock ahead for the U.S. market is the fiscal cliff. Assuming that hurdle is cleared, 2013 is one step closer to a stable and sustainable growth rate for autos, with volume above the 15 million unit mark.?

Barring that setback, analysts anticipate a steady shift in the sort of vehicles Americans have been buying.?

The upcoming North American International Auto Show will feature an assortment of new products, and the debut of the all-new 2014 Chevrolet Corvette and Chevy?s next-generation Silverado pickup are likely to be two of the star attractions. But the floor of Detroit?s Cobo Center will be covered with a variety of downsized models, including Honda?s pint-sized Urban SUV Concept and the new Lincoln MKC compact luxury crossover.

Ford's?B- and C-segment models ? subcompacts like the updated 2013 Fiesta and compacts???have jumped from 13 percent?of the overall U.S. market to 24 percent since 2004, according to Mark Fields,?Ford?s chief operating officer.?And the trend is expected to continue at an even faster pace going forward.

If anything, Americans are downsizing powertrains at an even more rapid rate, trading in V-6s for inline-fours and even abandoning traditional V-8s for high-tech turbo V-6s. Six-cylinder engines now account for more than half of the demand in Ford?s big F-Series pickups, Fields said.

While demand for smaller models is soaring, sales of some traditional American vehicles have remained strong ? pickups in particular. Credit the strong upturn in the housing market in recent months, said Mark Reuss, president of North American operations at General Motors.?

While the so-called ?personal use? segment has largely dried up, there?s significant pent-up demand among contractors and other professional for pickups and other full-size trucks, something Detroit?s Big Three hope to use to their advantage as they continue to hold off import competitors like Nissan and Toyota.

Pent-up demand is likely to float all boats, says analyst Joe Phillippi, from the largest to the smallest market segments. It helps, he adds, that automotive interest rates are at or near historic lows.

On the downside, makers have been cutting back incentives as demand outstrips supply, especially of more popular models like the Hyundai Elantra and the new Honda Accord. There are still bargains to be had on slower-selling models, but research by TrueCar.com reveals that incentives have slipped to their lowest levels in several years even as transaction prices ? the price customers actually pay ? have risen to near-record levels.

And that is likely to translate into record industry earnings, at least in North America. Ironically, the market is running counter to trends in much of the rest of the world. European car sales have been in freefall all year, and without a clear resolution of the Continent?s economic crisis, few see any short-term solution.? Even China, which has seen annual growth rates approaching 100 percent over the past decade, has started to stumble.

So, makers from around the world are once again looking to the U.S. to carry the load. The good news is that ?the forecast ahead looks even better,? Toyota?s top U.S. executive, Jim Lentz, recently said, adding that ?analysts expect we will reach 16 million in just a few short years.?

That?s still well short of the U.S. all-time record of 17.5 million vehicles sold in 2005, but it?s still a welcome turnaround from the disastrous slump the industry has only just left behind.

Source: http://www.nbcnews.com/business/auto-sales-look-good-2013-unless-we-drive-cliff-1C7755874

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