Morningstar analyst David Whiston agrees, saying " I think people don't give Detroit enough credit for how much healthier they are."
Both analysts said the companies have done a good job of reining in costs and increasing car prices. "The industry itself, for the first time ever, you're seeing pricing being positive and costs going down," Sterne Agee's Ward said. "And that is setting up a good value opportunity for the stocks."
But that value play—along with pent-up consumer demand and corporate restructuring in Detroit—comes with risks including economic overhangs in Europe.
A Higher Gear in the US
Americans delayed auto purchases during the recession. Plus, as consumers drive cars for an average 11.2 years, it was time to buy again for many — spiking demand and fueling growth in the U.S. auto market. A lack of used cars is also pushing up used car prices, making new vehicle purchase more attractive. And with interest rates low, financing remains cheap.
"This industry is pretty simple. It's driven by interest rates and it's driven by consumer confidence. Interest rates are at historic allows, consumer confidence is improving, and when you lay on top of that the average car on the road is over 11 years old, there's a lot of pent-up demand," Jim Lentz, Toyota USA president, told CNBC.
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March auto sales, due out on Tuesday, should be strong, JD Power and LMC Automotive predict. They are forecasting total light-vehicle sales of 1.465 million units, an 8 percent increase from March 2012.
March new-vehicle retail sales are expected to come in at 1.158 million vehicles, which represent a seasonally adjusted annualized rate (SAAR) of 12.1 million units, with volume approaching a double-digit increase from March 2012. "Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles," JD Power and LMC wrote in a press release.
New auto models should fuel demand further as the year goes on. Automakers should introduce 41 all-new vehicle models in 2013, a 78 percent increase from the 23 launched in 2012, according to Tom Libby, lead analyst for North America automotive market intelligence firm Polk. Redesigns, meanwhile, will more than double to 60 from 29 last year, he said.
Many of these new models will come from Detroit. "During 2013, there tends to be a skew toward General Motors," Libby said of the expected new models. "That's primarily because they had a lack of new product launches during their restructuring."
And with automakers spending heavily to market new models, it tends to drive showroom traffic, which often translates into new sales. While GM will account for the bulk of the new models this year, eventually all the major automakers will be refreshing their product lineups given the stiff competition, Libby said.
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