November 19, 2012
Used-Car Demand Up After Sandy
Since Hurricane Sandy ravaged tens of thousands of vehicles on the East Coast, used-vehicle pricing and demand are headed in a familiar, post-disaster direction: higher and higher. According to Automotive News, experts expect used-vehicle prices to increase $1,000 or more as dealers in areas affected by the storm stock up on used cars and trucks to sell to customers who lost vehicles to Sandy's water and wind. Many of those replacement vehicles will have to be transported from other parts of the country, driving up the cost, they said. Sandy is the latest in a series of events – including natural disasters – since the federal cash-for-clunkers program in 2009 that have spurred volatility in the used-vehicle market. Last month, "prices were actually declining during the first half," ADESA analyst Tom Kontos wrote in a research report. But used-vehicles prices "more than made up for lost ground during the second half of the month." ADESA Analytical Services said the average wholesale price of a used car sold at auction in October was $9,742, or 2 percent above September's average. For the full outlook on used vehicle pricing, click here.
Are Subarus the Best Cars Money Can Buy?
By the usual measurements, Subaru should be no more than an afterthought in the U.S. car market. It sells just seven car and crossover models and accounts for a slim 2.3 percent of U.S. auto sales. But according to Fortune magazine, Subaru has racked up more endorsements by independent arbiters of automotive quality and safety than just about any other manufacturer. Consumer Reports rates Subaru above every other manufacturer in performance, comfort, utility, and reliability, and says the company makes the best cars in America. ALG, the industry's arbiter of residual value and used-car prices, named Subaru the leader in retained value among mainstream brands. And after crash tests, the Insurance Institute for Highway Safety made Subaru a "top safety pick" across its entire product line, a distinction no other manufacturer can claim. Fueled by this trifecta of achievements, just about everything Subaru sells is flying off dealers' lots this year. Click here for a chart. Despite a chronic shortage of inventory, the company has been breaking monthly sales records with regularity, and sales for the year are up 26 percent compared with last year's. For the full story on how Subaru did it, and what their success means for dealers, click here.
Edmunds: Obama-Style Fiscal Cliff Not a Big Threat to Car Sales
The election is finally over and as the dust clears from victory parties, the outlines of the fiscal cliff — the $600+ billion slate of mandatory tax increases and government spending cuts due to take effect at year end — loom ominously in the distance. In the worst case scenarios, analysts claim that "going over the cliff" could reduce GDP and send the country spiraling into recession in 2013. The good news is that even the experts assign a low probability to the government doing nothing about these potential fiscal changes. The more likely compromise scenarios involve more limited tax hikes and spending cuts and, as such would have a more limited economic impact, including on car sales in 2013. President Obama ran on a platform of raising taxes. In particular, he has strongly supported letting the Bush-era tax cuts expire for individuals earning more than $200,000 and households earning more than $250,000 a year. According to Edmunds, such tax increases would affect only about 4 to 5 percent of car buyers and these wealthy buyers would be less likely to not make car purchases. For how other tax rate changes may impact car sales, including the AMT Patch and the Payroll Tax Increase, click here.
Factory Frenzy: Japanese Add N.A. Capacity
Japan's automakers are gearing up for the biggest wave of North American production expansion in a decade. The goals: Win back market share lost because of the 2011 earthquake and tsunami in Japan, boost sales in the world's most robust market and get around a dollar-yen exchange rate that makes exports from Japan unprofitable. Automotive News reports that Japanese automakers have rebuilt their North American output to record levels. But a vehicle shortage has become the biggest barrier to boosting sales. So executives at almost every Japanese company are planning new capacity increases in what is traditionally their most important market. Several plants under construction will open soon. But in recent interviews, the CEOs of Nissan Motor Co., Honda Motor Co., and Subaru parent Fuji Heavy Industries Ltd. outlined fresh North American capacity boosts – on top of those unveiled in the past year. Already, Japan's automakers are cranking out cars and trucks at a record pace in North America. Their combined production in the United States, Mexico, and Canada hit 4.3 million units through October. That's a 10 percent faster pace than in 2007, when their full-year total was a record 4.6 million. Click here for where and how these manufacturers will expand production in the coming months.
Hot Hatches Back in the Spotlight
When it comes to hot hatches — performance variations of hatchback vehicles — the Volkswagen Golf GTI was the car that started it all. The Detroit News reports that now, more than three decades after the GTI was first announced in Frankfurt, automakers are driving hot hatches back into the spotlight. Fiat SpA, the parent company of Chrysler Group LLC, has the 500 Abarth. General Motors Co. has its Chevrolet Sonic RS. Volkswagen still has its GTI, along with a Golf R. And don't forget about the Mini Cooper S, Mazdaspeed3, and Subaru Impreza WRX. Hot hatches of old had flair, considering they were economy cars, and they handled well. But popularity fizzled in part because the souped-up small cars lacked power and sound insulation. Now, more refined performance hatchbacks — which are popular in Europe — are filling out U.S. automaker vehicle rosters. Today's lift-back sports models have a healthy combination of power, prestige, fuel efficiency, and affordability. The Fiat 500 Abarth, for example, gets 160 horsepower from a 1.4-liter turbo engine at a price of $22,000. Click here for a picture. As automakers look to shave costs by manufacturing global vehicles, it's likely that more automakers will begin offering Americans hatchback versions of current models. For the full story, click here.
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