May 30th, 2012 at 11:51am
The National Auto Dealers Association says prices for used compact and midsize cars will drop by as much as 5 percent in June. Another day, another Chinese ripoff. This time it’s Dongfeng copying the Cadillac SRX. Chrysler plans to keep the Dodge version of its popular minivans while discontinuing the Town & Country. All that and more, plus guest host Michelle Krebs from Edmunds.com tells us what to expect for this month’s car sales.
I’m Michelle Krebs from Edmunds.com. Welcome to another episode of Autoline Daily. It’s Wednesday the 30th of May, 2012 and here’s the top news from the world of the automobile.
USED-CAR PRICES DECLINE
Prices for fuel-efficient used-cars have skyrocketed the last several years but that’s about to change. The National Auto Dealers Association says prices for used compact and midsize cars will drop by as much as 5 percent in June and continue to drop throughout the summer due to falling gas prices and the normal seasonal slowdown. For example, a used 2011 Toyota Prius is expected to decline by $900 in value next month. Overall, used-car values will decline 2 percent in June.
CALIFORNIA CREDITS FOR SALE
Beginning this year the state of California is requiring automakers to sell more hybrids and electric vehicles. To add incentive, the state gives credits to carmakers for selling them. The credits can be used to avoid fines or can be sold to other automakers looking to avoid penalties. According to Bloomberg, Nissan says it may sell credits earned from Leaf sales. Two years ago, Tesla sold $13 million worth of credits to Honda and another unnamed automaker. The quotas automakers must meet are based on market share in California, so in other words the larger the automaker, the more EVs and hybrids it must sell.
ANOTHER CHINESE RIPOFF
Another day, another Chinese ripoff. This time it’s Dongfeng copying the Cadillac SRX. As you can see it incorporates many styling cues from the Caddy. According to Car News China, the unnamed vehicle will go on sale next year with a starting price around $12,500. But that’s a bargain compared to the SRX, which costs close to $68,000 in China.
ITALY EARTHQUAKE STOPS PRODUCTION
A second earthquake has rocked Northern Italy. The 5.8 magnitude temblor came just nine days after the first quake struck earlier this month. According to Bloomberg, the death toll from both events has reached 16. More than 14,000 people have been evacuated from their homes. Also, several vehicle assembly plants have been closed because of the natural disasters, mostly so workers can be with their families. Maserati’s factory in Modena HAS been damaged. How badly is not known right now.
TOWN & COUNTRY DROPPED IN U.S.
Is it a car? Is it a van? No, it’s Caravan, and it’s sticking around for the long haul. The Detroit News reports Chrysler plans to keep the Dodge version of its popular minivans while discontinuing the Town & Country. Previously CEO Sergio Marchionne had hinted the Caravan was getting scuttled in 2014 but that’s no longer the case. Apparently he changed his mind because the Dodge variant was the company’s first minivan, and because it was introduced by former chairman Lee Iacocca. The Chrysler Town & Country will be replaced by a crossover vehicle.
LINCOLN’S NEW INTERIOR DESIGN CHIEF
Lincoln is getting a new interior-design manager. WardsAuto.com reports Peter Jones will start working in Dearborn next month. He’s been with Ford of Australia for seven years. Some of the creations to his credit include the interior of the new global Ranger as well as the exterior design of the FG Falcon Ute pickup. Interesting choice – a truck man for Lincoln. You know, I wonder if automakers have to pay any tariffs on imported designers.
After the break, the skinny on May sales. Are they as fat as everyone’s hoping? Find out next!
MAY SALES FORECAST
May traditionally is the biggest month of the year for car sales, and we at Edmunds.com expect a strong May when automakers report sales on Friday.
Our official May sales forecast is for the industry to sell just shy of 1.4 million cars and trucks. That would be 31 percent more than year-ago May and nearly 18 percent more than April for a Seasonally Adjusted Annual Rate – or SAAR – of 14.4 million vehicles.
Watch for May’s stand-out performance to come from Toyota. We’re projecting Toyota will post as much as a 90 percent sales increase over last May when vehicle production by Toyota and other Japanese automakers was slowed to a trickle by the March earthquake and tsunami. If our forecast holds, Toyota’s depressed market share will climb 4.5 percentage points from a year ago (at the expense of General Motors and Ford which will have lower share). The result could be that Toyota retakes the No. 2 sales position in the United States from Ford.
In addition to the recovery of the Japanese and a gradually improving U.S. economy, we see two primary factors driving continued strong car sales right now: pent-up demand and credit availability.
It’s no secret that the cars and trucks on American roadways are old. R. L. Polk puts the average age of cars in operation at just shy of 11 years old; the typical truck is even older. People simply have to buy a new vehicle, and used-car prices are high so that makes buying new a more attractive option.
The second factor supporting the release of pent-up demand is the significantly deeper and wider availability of credit, an indicator we have been watching closely for months. In fact, on Tuesday, Experian Automotive reported average credit scores for consumers buying a vehicle have dropped to near pre-recession levels. You’ll recall only the very best credit risks could get a car loan during the recession.
Indeed, our data further supports the fact that many more people are able to obtain car loans than had before, and many are those with older vehicles. Our data shows that for this year so far, consumers are trading in vehicles on a new-car purchase more than ever, and they are trading in the oldest we’ve seen since we started tracking such data a decade ago. The typical trade-in is about 6 years old. And while that number may pop up in a month here or there, we’ve never seen it be consistent for five months in a row as we have of late.
We are also seeing so-called subprime borrowers obtaining car loans in numbers we haven’t seen since before the recession. In fact, Chrysler has tapped into that market, which has helped generate some of the automaker’s big sales numbers of late. Subprime had always been a good market for Chrysler (as it is for Kia, Suzuki and Mitsubishi) but the Auburn Hills automaker was frozen out of that segment before now.
Barring something unforeseen that jolts the overall economy or disrupts the availability of credit, we see this pent-up demand continuing to release for the next year or two. We recently upped our forecast for full-year 2012 to 14.4 million vehicles, and we think a return to 15 and 16 million sales a year is on the horizon.
Again, I’m Michelle Krebs from Edmunds.com. Thanks for watching – or listening to today’s program – I’ll see you next time.