What’s driving gains in auto sales?

Marketplace Staff May 4, 2010
HTML EMBED:
COPY

What’s driving gains in auto sales?

Marketplace Staff May 4, 2010
HTML EMBED:
COPY

TEXT OF INTERVIEW

Tess Vigeland: Just a couple of months ago Toyota’s reputation took what many thought might be a fatal blow. Could the automaker ever survive the sticky pedals and all those recalls? But last month, sales were up 24 percent over last year. In fact, auto sales overall got a nice boost. The numbers, we should say, were down from March. But given what the industry’s gone through the last couple of years, any growth has to be a positive.

For some perspective we turn to Jeremy Anwyl, CEO of Edmunds.com. Welcome to the program.

Jeremy Anwyl: Well, thanks very much for having me.

Vigeland: So where are these gains coming from? Is this still all about incentives?

Anwyl: Well, I think it is. Now generally when people are talking about gains — we saw a lot of this yesterday as the numbers were being announced — they’re referring to last year. And this time last year was probably the worst car market in 20 years.

Vigeland: You know, I know Toyota is doing quite well, and they’ve been doing a lot of incentives recently, haven’t they?

Anwyl: Well, they stepped them up. Their sales in March took a big increase. But in April they were down about 15 percent from March. So they did cut back on incentives, and their sales dropped as well. In fact, they’re even talking now about making some announcements this week about maybe sweetening the incentive pot a little bit.

Vigeland: But here we are just a few months past the big recall issue with Toyota where everybody was saying that Toyota the brand was no longer what it used to be, and yet we’re out buying the cars. What does this say about our consuming behavior if, you know, these low prices can basically override any alarm over safety?

Anwyl: Well, it’s an interesting point because a couple of months ago in the middle of all this people could have looked at this and said, wow, no one is going to buy a Toyota with all this negative publicity and yet they had a huge month in March. And they basically increased incentives by about $500 roughly. They went to ballpark $2,500 from about $2,000, so it wasn’t a huge amount of money they threw out there. But what’s happening is really this: They are a lot of Toyota loyalists out there, people that have owned Toyotas, they’ve had maybe many Toyotas in the family, they feel very comfortable with the brand, never had a bad experience personally, and if they’re in the car market or thinking about buying a car, and Toyotas are on sale then it sounds like a very good deal to them. Where Toyota has taken a hit, and we haven’t seen this in the numbers yet because they’re so many loyalists out there, would be people that might be thinking of another brand first. And for them it’s been very easy for them to just kind of say, well, I’m aware of all this, I’m just not going to put Toyota back on the shopping list — at least not yet.

Vigeland: Can we at this point celebrate the auto sector turnaround? Or are we in a blimp, and there will be another turndown once those incentives start going away?

Anwyl: Well, we’ve had incentives going back for a long time. So clearly car sales today are very dependent on incentives. I think consumers in general are pretty wary still, and when there’s a good deal out there, consumers will come out and buy. When the deals aren’t so good, they pull back. Generally, though, you have to put this into perspective, we’ve been used to car sales around $16 million a year. And right now we’re still only talking about $11 to $11.5 maybe for this year, so it’s still awful, it’s just not as awful as it was a year ago. The one good thing, though, is that the car companies have adjusted to this. So we’re going to be hearing about some big profits. You know, Ford surprised everybody last week with very robust profits, and it really speaks to, dare I say it, the bright side of a recession and that is that it gets companies focused on costs, and when they come out of it they can be very profitable.

Vigeland: Jeremy Anwul of Edmunds.com. Thank you so much. It’s been nice talking to you.

Anwyl: Any time, thank you.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.