Can The Battered Auto Sector Mount a Real Recovery In 2010?

by Investment U Research
Wednesday, January 6, 2010

After another brutal year, the auto industry summoned up some end-of-year strength in 2009, with analysts projecting annualized sales of cars and trucks to top 11 million in December.

If that number holds true, it would mark the second-best month of 2009 behind August’s government-assisted sales burst. It would also beat the December 2008 sales figure of 10.3 million, plus a month-to-month increase over the 10.9 million sales seen in November 2009.

BMW, Ford, Honda, Toyota’s Lexus and General Motors’ soon-to-be-gone Saturn and Pontiac brands all experienced higher-than-expected returns in December, as customers were willing to buy without government rebates. Incentive programs from dealers also enticed customers.

But can one month really indicate an improved market for the year ahead?

The Auto Industry: 2010… And Beyond

Bargain prices for used cars, lower interest rates and improved economic data have pushed consumers back to dealerships. But confidence is key – and it’s still lacking, due to factors like the continuing housing market woes and high unemployment.

And while December’s auto sales numbers are certainly positive, they pale in comparison to the trend a year ago when the popularity of SUVs led to sales topping 17 million in the 1990s.

Nevertheless, there is cause for auto optimism in 2010. Estimates call for sales to hit 11.4 million this year, rising as high as 13 million in 2011, despite consumer hesitation on large purchases.

And if the U.S. economy gets back on track in a more definitive way, that should help the healing process in the auto industry.

Good investing,

Sheena Martin

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