Auto industry accelerating into the new year
Automakers and auto buyers alike will have plenty to celebrate when the ball drops in Times Square next week—and, it appears, plenty more to look forward to in 2014.
For the industry still recovering after its worst recession in decades, the books are closing on what was the best year since the economy collapsed, even as industry analysts and planners look forward to stronger sales in the new year.
For consumers, meanwhile, 2013 saw a slow—if often unsteady—improvement in the economy that made millions confident enough to go back to dealers, who were loaded with an array of new products that were generally rated the best the industry has offered. And 2014 is expected to bring even more choice to the market—Ford alone is planning to add 23 new models next year.
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"We expect December to finish strong," said Larry Dominique, president of ALG and executive vice president, industry solutions at TrueCar.com. "Consumers are taking advantage of low lease rates and inexpensive financing, which continues a shift from buying used to buying new."
In traditional fashion, the real kickoff for the new year will come in blustery Detroit next month, when the North American International Auto Show opens. According to organizers, the event will bring the debut of around 50 new cars, trucks, crossovers and concept vehicles—from the world premiere of the next-generation Ford F-Series pickup, to the North American unveiling of Toyota's ultra-clean hydrogen fuel-cell vehicle—a prototype of the vehicle that the Japanese maker plans to put into production a year later.
The outgoing year delivered a number of surprises, notably the strength with which the industry came roaring back after dropping to less than 10 million sales during the depths of the Great Recession. When the books are closed, 2013 sales will likely have topped 15.5 million, according to industry data. The only real question about 2014, most analysts and planners agree, will be just how much higher the numbers will go. Though likely still short of the market's prior peak of around 17 million in 2000, consultancy IHS Automotive anticipates sales will top 16.1 million, and others, such as LMC Automotive and J.D. Power and Associates, predict the number will nudge closer to 16.5 million.
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Improvements in both the jobs outlook and, more specifically, the housing market, have been helpful in driving demand, noted University of Michigan economist Richard Curtin, who oversees a series of widely followed economic surveys conducted by the school in partnership with Thomson Reuters.
The latest survey's Sentiment Index rose to 82.5 in December, up from 75.1 in November and well above last December's 72.9. The year-over-year gain was nearly equal when it came to both current economic assessments and future economic prospects.
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The long-awaited housing boom has helped make the pickup market the hottest segment of 2013—and the 2015 Ford F-Series perhaps the most important debut expected at the Detroit Auto Show. Significantly, Ford is expected to make extensive use of lightweight aluminum with the new model, shaving perhaps 500 pounds or more off its mass—which should translate into as much as 5 mpg in improved fuel economy.
While the U.S. Energy Information Agency is anticipating fuel prices will stay fairly stable—perhaps even drop—in the coming year as global oil production increases, consumers will have the added benefit of seeing makers continue their competitive race to improve fuel economy. Facing a sharp increase in the federal mileage mandate for 2016—and an even stiffer rise for 2025—automakers will roll out a wide array of new technologies to boost mileage in the coming year.
That includes more use of lightweight aluminum and super-light carbon fiber, an expanded number of offerings equipped with stop-start technology—which can briefly shut off the engine instead of idling at a stoplight or at a fast food window—and more hybrids, plug-ins and pure battery-electric vehicles.
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Consumers do need to be wary about rising vehicle prices next year. Average transaction prices—what motorists actually pay after factoring in options and discounts—rose well above the rate of inflation in 2013, noted Alec Gutierrez, senior analyst for Kelley Blue Book, who reported that in November alone, they were up $946—to an average $32,769.
"Transaction prices continue to rise as consumers look for newly introduced or redesigned models as well as crossovers and pickup trucks," Gutierrez said.
On the positive side, incentives have been rising in recent months, as well. And new vehicle loans are not only easier to obtain but less expensive than they have been in years, so the actual monthly cost to a consumer is often lower despite rising prices, analysts note.
And with assembly lines primed and ready to pump out even more products for 2014, showroom lots are, in many cases, filled to the point of overflow. That means dealers are more eager to do what it takes to get buyers to sign and drive. So, for at least the coming months, shoppers should be in the driver's seat when it comes to landing a good deal.