Auto Outlook: Automakers rewarded as buyers opt for gas-sippers
High gasoline prices may be helping the auto industry to its best year in recent memory with sales on pace to top 15 million vehicles on an annual basis.
With unleaded regular near or exceeding $4 a gallon in most of the country, some U.S. auto executives have already proclaimed 2012 the year of the car as consumers scrap or trade-in aging, repair-prone vehicles for new more fuel-efficient passenger cars and smaller SUVs.
"Higher gas prices are spurring people to buy vehicles because they want vehicles that get better fuel economy," Ford Motor Co. Americas President Mark Fields told The Detroit News ahead of the New York International Auto Show.
Fields said Ford is adding shifts at assembly plants in Chicago and Michigan to keep up with anticipated demand for new vehicles like the 2013 Lincoln MKZ, which debuted in New York.
"We had always expected the industry to come back," he said, "and we're adding a number of shifts."
Ford sold 223,418 vehicles last month, a 5 percent improvement, for its best U.S. March sales since 2007. The story was better for General Motors and Chrysler, which saw March sales rise 12 percent and 34 percent, respectively.
GM said a dozen of its vehicles EPA-rated to get at least 30 mpg on the highway had combined sales of more than 100,000 units in March.
"Three years ago, about 16 percent of the vehicles GM sold achieved at least 30 mpg on the highway. Today, that number is about 40 percent and we have more new fuel-economy leaders on the way, including the Chevrolet Spark, Cadillac ATS and Buick Encore," said GM North America President Mark Reuss in a statement.
In 2011, GM said 40 percent of its new vehicles had four-cylinder engines and it plans to double the number of vehicles offering turbocharged engines from four to eight in the 2013 model year.
"Automakers who invest in more efficient vehicles are investing wisely," said a Carol Lee Rawn, transportation director of sustainability advocate Ceres, which released a report by Citi Investment Research and Analysis.
"Given the volatility of gas prices -- and the likelihood that they'll head through the roof again -- it's clear that customers want better fuel economy and delivering it means a better bottom line for the industry," she said.
The report, "Fuel Economy Focus: Perspectives on 2020 Industry Implications," found profits of U.S. automakers are likely to grow more than 6 percent thanks to new proposed national gas mileage and emissions standards that gradually raise Corporate Average Fuel Economy to 54.5 mpg between 2017 and 2025. The report estimates that could translate to an extra $2.4 billion profit for American automakers in 2020 with industrywide profits rising 5.3 percent or $4.76 billion.
The increase in mileage standards could boost sales of GM, Ford and Chrysler by 4 percent, or 300,000 vehicles, the report concluded.
"Although the automotive industry as a whole will benefit by meeting the new standards, the Detroit Three will enjoy the highest relative profits boost," Oakland University School of Business professor Walter McManus, who did the report's sales and profits analysis, said in a release.
"Automakers today are already working on the improvements to the internal combustion engine and overall vehicle design to get us to 54.5 mpg," said Alan Baum, whose firm conducted the sector analysis. "Turbocharged direct injection, advanced transmissions, electric power steering, low-rolling resistance tires, turbocharging, variable valve lift and timing are available now and they continue to improve.
"These technologies are not only cost-effective, but also make for better performing vehicles than those currently on the market."