U.S. car sales were at their highest level in five years
Automakers ended 2012 with better-than-expected sales in December, capping a banner year in which U.S. car sales rose to a five-year high. The industry is estimated to have sold 14.5 million vehicles in 2012, up 13 percent from the previous year, and the biggest annual bump since 1984. The industry's future looks even brighter: Analysts expect auto sales in 2013 to reach 15 million.
The strong sales are the latest evidence that the economy is recovering from the Great Recession, which slammed the auto industry and led the government to bail out General Motors and Chrysler. (GM reached an agreement with the Treasury Department last year that should finally return the company to private hands by early 2014.) "I think the underlying fundamentals of the economy are very sound," Mark Reuss, president of GM's North American unit, told The Los Angeles Times. "Access to money is sound, you see employment steadily increasing… I think that's pretty upbeat."
In addition to the economic recovery gaining momentum, the industry is bouncing back far faster than originally expected. "It wasn't long ago that most analysts were expecting the industry to take until the middle or even the end of the decade for sales to top 15 million," says Chris Isidore at CNN Money. However, auto sales in the U.S. remain below pre-recession levels. In the decade prior to 2008, annual auto saves averaged 16.7 million.
Furthermore, industry insiders say sales could easily hit a bump in 2013. "Auto executives say they need to see a continued downward trend in unemployment and a stronger resurgence in the housing market," say Jeff Bennett and David Pearson at The Wall Street Journal. "Higher home values and growth in new home construction are essential elements to maintaining strong demand and ignite pickup truck sales that have sputtered as contractors and small business owners wait to replace worn out vehicles."
And while auto companies are relieved that Congress managed to prevent across-the-board tax hikes earlier this week, they are still concerned that the government could throw a wrench in the economy by causing the U.S. to default on its debt or allowing a batch of crippling spending cuts to kick in. "There are several fiscal matters that remain unresolved and will continue to weigh on consumer and business confidence in the months ahead," said Ellen Hughes-Cromwick, an economist for Ford.
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