Car Sales Accelerate Heading Into 2013

At least one part of the economy is enjoying a strong resurgence.

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A worker checks one of the Kia Cee'd frames manufactured at the newly built Kia car factory near the northern Slovakian city of Zilina on Thursday, Dec. 7, 2006. The production of the factory, that costed about one billion euros (US$1.32 billion) and that is one of the biggest investments in Slovakia, was oficcially launched today on Dec. 7th.

If car buyers heard about the fiscal cliff in December, they high-tailed it in the other direction.

Many consumers and businesses slowed their spending at the end of 2012, as they waited for the outcome of negotiations in Washington over tax hikes and spending cuts. Car buyers were an exception. Sales in December were the strongest since 2007, with total sales for the year hitting 14.4 million, according to WardsAuto—a 13.4 percent gain over 2011. The accelerating pace of sales suggests that automakers will sell well over 15 million vehicles in 2013, which is close to pre-recession levels.

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Several factors are helping the industry recover from the dismal days of 2008 and 2009, when General Motors and Chrysler declared bankruptcy and Ford nearly did. Low interest rates, engineered by the Federal Reserve, are helping buyers keep their monthly payments down, and more buyers—including subprime borrowers—are getting credit. Plus, buyers apparently feel secure enough in their jobs to commit to long-term purchases.

A growing market is boosting sales for virtually all automakers, but some are doing better than others. Here are some of the top developments in the car business in 2012:

1. Toyota rebounded: Sales had tumbled after the sudden-acceleration controversy in 2010 and the Japanese earthquake in 2011. But Toyota's U.S. sales rose 27 percent in 2012, double the overall increase. When worldwide sales for 2012 are finalized, Toyota will most likely have reclaimed the No. 1 spot from GM.

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2. Chrysler recovered: Sales in 2012 were up 21 percent from the year before at the No. 3 domestic automaker, thanks to fresh models like the Dodge Ram pickup, the Dodge Dart compact, and the diminutive Fiat 500 from Chrysler's parent company.

3. General Motors struggled: GM is still the top U.S. automaker, but sales in 2012 grew by just 3.7 percent, far less than the industry average. And GM's U.S. market share dropped to about 18 percent, according to Ward's, which would be the lowest level in more than 60 years. GM sales could surge during the next couple of years, however, since it plans to introduce many new products that will update its aging fleet.

4. Ford leveled off: Unlike GM and Chrysler, Ford turned itself around without a government bailout, but sales in 2012 grew by just 4.7 percent. Lincoln, a weak brand that Ford has promised to revive, dragged down sales.

5. Volkswagen surged: VW had the biggest sales gain of any major automaker in 2012, with sales up 35 percent. The German automaker's turbodiesels are a hit, as is the spacious and affordable Passat sedan.

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6. BMW rocked: The luxury automaker (which includes Mini) reported its best sales year ever in the United States, a testament to the brand's powerful appeal at a time when many consumers are still cutting back.

7. Buyers spent more: The average American car buyer spent $31,228 on a vehicle in December, a record high, according to car-research site TrueCar.com. Low interest rates are helping buyers get fancier cars while still keeping their monthly payments down. Strong truck sales in December helped boost transaction prices.

8. Automakers stayed profitable: Sales rose in 2012 even though spending on rebates and other incentives fell, a sign that automakers are healthier than they were five years ago. That may mean fewer fire sales for buyers, but it ought to keep the automakers in business.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.