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September U.S. auto sales were solid for most carmakers. The market is now on pace to see its best year since before the financial crisis.
In the case of the Japanese Big Two, this is particularly important, as both were hit hard by the earthquake and tsunami that crushed their sales in 2011.
The U.S. auto market is the most competitive in the world. It essentially collapsed during the financial crisis, but it has rebounded substantially. The U.S. is now on track to see nearly 15 million in new vehicles sold in 2012, after a lot of analysts expected something closer to 14.5 million. During the dark days of 2009, that number was slightly more than 10 million - not enough sales to support the number of carmakers who sell cars in the U.S. market.
There are three main themes developing.
The first is the nearly astonishing, back-from-near-death experience of Chrysler, which was effectively taken over by Italy's Fiat after the Detroit meltdown in 2009. Its September 2012 year-over-year improvement of 12 percent blew away both General Motors and Ford.
Second, General Motors has found success with small cars. For more than a decade — and really for most of its history — GM ignored the small car market, making the sensible decision to leave skinnier profits to other automakers, initially the Japanese and later the South Koreans. The GM bankruptcy in 2009 changed its tune profoundly. So the company that once counted the hulking Hummer in its stable of brands is now making bank with compact sedans like the Chevy Cruze and subcompacts like the Spark and Sonic.
Third, there is a lot of replacement pressure that has built up in the market. The average age of a vehicle on U.S. roads is 11 years. That is a testament to how much quality in the auto industry has improved overall. But that also means you have too many cars with odometer readings of 150,000 miles and up. Some cars may be designed to last forever. But the vast majority are not. So a good portion of the uptick in sales involves consumers who are confident enough in the economy's future to not just buy a new car, but — and this is important — finance it.
Why is that important? Because the automakers finance a lot of buyers. And if they can make money on car loans, it's a big plus for their bottom lines.