Auto sales are surging across the country, touching off a virtuous cycle of healthy competition, job-creating investment and high-tech innovation that stands apart from much of the still-sputtering economy.
With numbers due out Wednesday, analysts have predicted that August will prove to be the best month for auto sales since before the recession. Meanwhile, buyers are getting cheaper auto loans, allowing them to pay higher prices, pushing consumer spending on new vehicles in August to what might be “the highest level on record,” according to J.D. Power, a market research company.
“Automakers are not only selling the highest number of cars in years, but they are also charging more,” said Jesse Toprak, a senior analyst at Truecar.com, an auto industry research firm. “The auto sector has become the shining star of the economy.”
The strong performance by automakers stands in contrast to the larger economy, which is still struggling with high levels of joblessness and stagnant wages for average workers.
“It’s all kind of counter to what you would expect given where the economy is,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive, a market intelligence and forecast company.
The auto industry has accounted for a quarter of the nation’s overall economic growth since the recession ended in 2009, according to calculations by the Center for Automotive Research (CAR). “That is pretty remarkable, given that we are less than 3 percent of the economy,” said Sean McAlinden, CAR’s chief economist.
Boosted by the robust sales and healthy profits, automakers are planning to move long-discussed innovation from the test track to the road. General Motors has said it will develop a car by the end of the decade that will be able to drive itself in most circumstances. Nissan, meanwhile, has said it will introduce a driverless car by 2020. Nissan also has added hundreds of new jobs at its electric-car battery plant in Smyrna, Tenn.
Automakers are ramping up production and hiring workers to keep pace with demand, which analysts project will result in as many as 16 million new-vehicle sales in 2013 — not far off the record 17 million sales achieved before the downturn.
Last week, Ford launched the first domestic production line for its redesigned Fusion. The popular sedan, which previously was manufactured exclusively at a plant in Mexico, is now also produced at a plant in Flat Rock, Mich., about 25 miles from Detroit. Ford added 1,400 jobs to staff the new production line.
The jobs are part of a continuing surge in domestic auto-industry hiring, after reductions decimated its workforce in recent years. There are 682,000 auto-plant workers in the United States, up from 561,000 in 2009, according to CAR.
“We have seen employment recover, but not as much as sales, production or profitability,” said McAlinden, noting that there were 1.1 million domestic auto workers in 2000.
The growth in auto sales is powered by a confluence of factors, analysts said. The average age of the U.S. car and light-truck fleet is more than 11 years, meaning many Americans need new cars. In addition, interest rates are near-record lows, while lease deals and loans to people with less-than-spotless credit have become more widely available.
Experian, a credit information firm, said 27 percent of new cars were leased to drivers, up from 11 percent in 2009. In addition, subprime loans accounted for an additional 27 percent of loans. Meanwhile, the average amount buyers borrowed for a new-car loan has increased to $26,526, up from $25,714 a year ago.
The availability of credit and automakers’ improved ability to project future sales have taken pressure off manufacturers to provide incentives to drive sales. Truecar.com analysts say incentive spending is roughly the same as it was in 2012.
“Incentives are better optimized by manufacturers,” Toprak said. “They are not spending like drunken sailors anymore . The reason is they do not need to. Demand is high without incentives.”
Tammy Darvish, vice president of Silver Spring-based Darcars Automotive Group, called the market “a perfect storm.”
“You have record-low interest rates, and credit has loosened up a lot,” she said. “So goes availability of finance, so goes our industry.”