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The new normal in American cars

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Category: Auto
Published on Sunday, 08 April 2012 Written by Fahad

By Doron Levin, contributor

The new normal in American cars FORTUNE -- The U.S. vehicle market is solidly rebounding, with sales up 12.7% in March and 13.3% for the quarter -- an especially impressive development given the recent spike in retail gasoline prices to an average of roughly $4 a gallon for unleaded regular.

Though some buyers no doubt are trading for smaller, more fuel-efficient models, others are deciding to shoulder the expense of a new vehicle at a time when their pocketbooks are taking a hit at the gas pump. Sales of cars were up 16% for the month over March of last year, while heavier vans, pickups and sport-utilities were up only 9%.

Better cars are helping, too. "Consumers are responding to significantly better vehicles out there, in terms of features and performance -- and, especially, fuel efficiency," says Ivan Drury, senior analyst for Edmunds.com, an automotive website based in Santa Monica, California. "The manufacturers have been able to downsize engines and improve efficiency without much loss of power."

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For the month, vehicles sold at a seasonally adjusted annual rate of 14.4 million units, consistent with widespread forecasts of 2012 sales in the neighborhood of 14.5 million. If that pace continues and the forecasts pan out, this year's total could jump almost 2 million more than the 12.6 million vehicles sold at retail last year.

Drury says the relatively strong vehicle sales reflect improving economic performance that has already taken place, as opposed to that which might be on the way. "You need that job or a raise before you go ahead and buy a new car," he said.

That's the good news. The badly bruised global automotive industry is finally returning to normalcy. But it is facing a new normal, as the recovery cements major shifts, long in the making. Since the last recession, the competitive breakdown among manufacturers has continued its remarkable shift from the days when the Big Three Detroit-based automakers dominated.

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Today, General Motors (GM), which once owned about half the market, has maintained its historic hold on the top position -- but not by much. GM won a 17.5% share in the first quarter, two percentage points ahead of Ford Motor Co. (F). Chrysler had an 11% share. (Though based in Auburn Hills, Michigan, Chrysler since 2009 has been controlled by Fiat SpA of Turin, Italy.) Thus, the so-called Detroit Three currently control 44.3% of the U.S. market, down from 44.9% in the first quarter of last year.

Toyota (TM) captured 14.1% of the U.S. market in the quarter, followed by 9.2% for Honda (HMC) and 9.3% for Nissan (NSANY). South Korea's Hyundai/Kia group accounted for 8.7% of the market. In other words, about 85% of the U.S. market is controlled by seven manufacturers -- none overwhelmingly dominant -- a mirror of the competitive breakdown in Europe where half a dozen or so automakers share the market.

Nissan, among the manufacturers showing strong sales momentum and share growth, said it set an all-time sales record in March. The company's Infiniti luxury-vehicle franchise posted lower sales for the month, as the franchise introduces its JX seven-passenger crossover at the New York Auto Show this week.

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General Motors, which earlier in the month said it was temporarily suspending production of its Chevrolet Volt gas-electric hybrid to reduce inventories, sold 2,289 units in March, double the month before and the best monthly total ever.

And sales of Toyota's Prius gas-electric hybrid models totaled 28,711 for the month, up 54% from a year ago. By a small margin all Prius versions outsold Toyota's popular Corolla compact for the month.

Good times have returned to automaking, even if they look quite different that just a few years ago.

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