Car sales help rev up the economy
There are signs that the Michigan economy is rebounding — slowly, but surely. The following is the second in a series of stories that point to a more positive outlook in areas that affect Tecumseh and the surrounding communities.
In January, the Polk auto industry research firm predicted auto sales would continue to rise, leading the economic recovery in the United States. The company based its findings on rising numbers in 2012 and the introduction of 43 new vehicle models, a 50- percent increase over new models released in 2012.
“We’re actually on track to be up 15 percent for the year,” said Charley Rebottaro, General Manager of Underwood Chevrolet Buick in Clinton. “We’ve been up six of the last seven quarters.”
He sees different indicators for the continued sales growth at the dealership. One factor is customer trust in a business that has been part of the community for over 70 years.
“Our product has improved over the last couple of years,” said Rebottaro about another reason for increased sales. “We do have state-of-the-art product.”
Financing for new car purchases often impacts the decision to buy a new car. “Leasing is back,” Rebottaro said, which he believes is a plus for many new car customers.
The dealership has seen an increase in trade-ins of foreign cars for new GM products. Rebottaro believes people see the quality of cars available from American companies.
March total vehicle sales show continued growth in the U.S., with truck and crossover sales leading the way. Experts use auto sales numbers to predict economic improvement in business, as well as at the consumer level. U.S. auto sales numbers are one of the first things economists look at each month to see if the economy is thriving.
“We’ve seen an increase in truck sales.” Rebottaro said. “A lot of truck sales are related to lower gas prices.”
Trucks are often purchased by small businesses, and higher truck sales are an indicator things are looking up for businesses specializing in food delivery service, like caterers and bakeries. Increases can also be attributed to purchases by service professionals, like plumbers and electricians, as well as construction.
According to one analyst, the housing market often drives truck sales up or down. In March, light duty truck sales were reported at 699,244 units, with year-to-date (YTD) numbers at 1,787,365, up 10.1 percent from 2012 YTD numbers. Crossover sport utility vehicles had the highest sales numbers at 307,794 in March, with the YTD totals 14.8 percent higher than sales in 2012.
During the month of March, the top vehicles sold were the Ford F Series pickup at number one, Chevrolet Silverado at number two, followed by the Dodge Ram pickup at number six.
Although summer gas prices are expected to be lower than they have been in recent months as well as slightly lower than 2012 prices, auto analysts don’t expect it will mean consumers will purchase larger vehicles. Sales increases for autos are expected to continue in fuel-efficient small cars and crossover SUVs.
New models or redesigned vehicles often inspire more new car purchases, and Chevrolet has 13 completely redesigned or new models in 2013. “We’ve had several people trade a past model Malibu for the new style Malibu,” said Rebottaro about the power of a new car design.
Although lower gas prices seem like a motivator for consumer auto purchases, experts believe higher sales numbers are driven by the need to replace aging vehicles. Polk says the average car is now more than 11-years-old. Consumers put new car purchases on hold when the recession hit and have been more cautious about spending money as the economy has improved.
Fewer trade-ins and the 2009 Cash for Clunkers government program negatively affected used car inventory at dealerships all over the country, but Rebottaro is now seeing an increase in trade-ins as well as in used car sales. “The used car market has rebounded,” he said. “The growth has been equal with new car sales.”
Rebottaro credits lower interest rates and better built cars for much of the increase in used cars availability and sales. “There are very few cars that we don’t consider making a retail piece,” he said about the value of older cars with high mileage.
Only recently a 1998 Chevrolet Tahoe came in the lot with mileage over 200,000 but still a good car and investment for the right customer. Not long ago, a truck with mileage that high would have been moved to the back row of the used car lot, according to Rebottaro.
For southeast Michigan, strong vehicle sales mean a stronger manufacturing sector. This section of the state has the most industrial employment with 378,278 jobs.
The “Big Three” automakers are spreading the wealth from increased revenue by investing back in their Michigan locations, which means more jobs for residents.
Chrysler plans to expand Detroit plants at a cost of $240 million. Ford will expand its Michigan workforce at six state factories, investing $773 million.
Auto suppliers took a big hit when Chrysler, Ford and GM were affected by the recession. The good news is that with the auto companies expanding, more product will be needed from local suppliers, which means there will be more supplier openings or expansions. The auto industry truly does drive the economy in several different directions.