The city of Detroit may be in trouble, but the big three car automakers based in and around the city, General Motors, Chrysler, and Ford, notched their best July sales in years. Despite rising interest rates, the three U.S. auto giants reported double-digit gains compared to July of last year, offering more evidence that the industry’s engine has revved back to life.
GM led with a 16 percent gain in sales and an especially impressive 51 percent growth for pickups. (You can thank the booming housing market for that.) Ford sales rose 11 percent, as the company enjoyed its best July since 2006. But for Ford, all growth came within the Ford brand as Lincoln sales declined. Some of Ford’s best performers were small cars, which enjoyed their best month since 2000. Chrysler similarly reported an 11 percent year on year gain, as July sales hit a 7-year high. The results were driven in part by the popularity of Ram Trucks, the Dodge Durango SUV, and the Jeep Grand Cherokee.
Toyota and Honda saw sales rose by 16.5 percent and 21 percent, respectively. Nissan had gains of almost 11 percent, its sales of 109,041 breaking the company record for July. Though interest rates are climbing, they're low enough that customer interest in cars remains high. Meanwhile, car companies are rolling out consumer-friendly lease agreements.
The auto industry is a major driver of economic growth in America. It’s the biggest manufacturing sector in the country and the biggest retailing sector. In June 2013, autos employed nearly 3.7 million Americans. The industry added over 100,000 jobs from June 2012 to June 2013 according to the Bureau of Labor Statistics.
Exchange rates and labor costs have given the American auto industry a new edge in exports, too. In early July, Honda said it expected to be exporting more vehicles from America than it imports from Japan by the end of the 2014 year. Chrysler is reportedly shooting for export numbers around the half-million mark in 2014, more than double the number of cars it exported in 2012. Overseas markets still pose challenges, however; GM’s disappointing second quarter earnings, down to $1.2 billion from $1.49 billion last year, were mainly the fault of plunging profits in Asia.
The forecast is mixed for U.S. auto, with Goldman downgrading the sector’s equities from “attractive” to “neutral” for the first time since 2009 in the face of concerns about rising interest rates. And though July sales figures were a strong showing, they came as a slight disappointment for many analysts, who anticipated even bigger growth. Those who outperformed tended to be those for whom the bar was set lower, like Hyundai and Kia, whose modest 4.5 percent gains outpaced average predictions of 3.4 percent.
Despite minor letdowns, the annualized pace of industry wide sales improved to 15.8 million vehicles in July, from 14.1 million in 2012, and many analysts strengthened their 2013 estimates. With the help of GM and Ford and jobless claims at a five-year low, the S&P hit a record high of over 1,700 points.
Whether or not this August turns out to be a hot one, the auto industry’s gains show no signs of melting away in the weeks to come.