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2012 Auto Sales - What's Hot (and Profitable?)

Automobile

By Matt McKinnon

Two recent Automotive News articles caught my eye—one discussing the most popular vehicle segments thus far in 2012 and another on dealers’ profitability on current-year sales. Given the volatility of gasoline prices in response to the economy and upcoming presidential election, the year-to- date results of the automotive industry are important. A reflection upon the first half of 2012 can help dealers manage the remainder of the year and plan for 2013.

What’s Hot

Not surprisingly, small and mid-sized cars, minivans, and hybrids are the most popular vehicle segments among consumers this year. Big SUVs and luxury roadsters are becoming less and less popular with buyers. According to Automotive News, sales of mid-sized cars, such as the Toyota Camry, Chrysler 200, and Volkswagen Passat, are up 21% in 2012. Small, value-focused cars – like the Toyota Yaris, Kia Rio, and Chevrolet Sonic – have sold extremely well, up 80% this year.

Minivans are resurging in popularity, based upon the utility inherent in this segment. An increase in sales of 16% so far this year has been seen, led by the Nissan Quest, Chrysler Town & Country and Dodge Grand Caravan.

Alternative-fueled vehicles have also done very well so far in 2012. Sales of hybrids, plug-in hybrids, and fully-electric vehicles have increased 71% through June 2012, driven by the Toyota Prius and Chevrolet Volt.

Profitability Levels in 2012

Although dealerships’ sales are rebounding from the impact of the 2011 earthquake, gross profit margins are falling. This “normalization” is a direct result of increased availability of Japanese brand inventory – many customers are looking for discounts, as opposed to paying close to sticker last year when choices were limited. According to Kelley Blue Book, the actual sales price of vehicles has decreased almost $500 since 2011.

Fortunately, the impact of this profit decrease has been minimized by many dealerships. Cost control and expense management, supported by increased sales volume, has allowed profits to remain consistent from year to year.

Outlook

As the year continues, it will be interesting to see how the segment sales mix and profitability per unit ebbs and flows. Will gasoline prices remain stable? How will the economic condition of the United States change? Dealerships should continue to monitor local and regional industry results to plan appropriately for 2013.

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