2010 Trends: Higher Sales, Lower Incentives, More Recalls, Lofty Used-Car Prices, Additional Technology
By Michelle Krebs December 29, 2010
The year 2010 may well be remembered as the year-after -- the year after the worst year for the economy, the worst year of auto sales in the U.S. in recent memory and the year after two of the three U.S. automakers filed -- and emerged from -- bankruptcy.
Though vehicle sales in 2010 will still be the second worst since 1982 coming in at about 11.5 million, the year saw the slightest start of a recovery. The trajectory is upward with December sales likely will be the highest of the year and the highest since the Cash for Clunkers-fueled August 2009 -- if the East Coast's holiday blizzard didn't damage them too much.
The U.S. auto industry saw other trends in 201, noted by Edmunds.com. They include: higher sales in some unlikely segments, including pickup trucks and SUVs, while sales were lower in more likely ones, such as small cars and hybrids; decreased incentives by automakers except the Japanese ones; more recalled vehicles due to Toyota's massive recalls and subsequent fall-out; and soaring used-car prices.
Sales: Trucks, Midsize Cars Up; Compacts, Hybrids Soft
While new car sales trended upward in 2010, some segments are doing better than others.
Stable gas prices through most of the year meant that consumers were more willing to buy gas-hungry pickup trucks and SUVs, especially large ones. The rise of sales in those segments is due, in part, because those were the hardest hit by the recession and 2008's gas price spike. And buyers of vehicles like pickup trucks, who use them for their work, had simply put off replacing their old ones during the recession and could wait no longer.
As a result, truck sales for the year are expected to be up 14.9 percent; and SUV sales are up 21.3 percent over last year.
Midsize car sales saw a surprising surge in 2010, capitalizing on the relatively conservative mood of car buyers and driven largely by new entries in the segment, notably the critically-acclaimed Hyundai Sonata, which has been running in the No. 1 spot among most considered vehicles on Edmunds.com for most of 2010.
Midsize car sales are expected to be up 7.8 percent over last year. Share of the market is likely to be up as well. Midsize car share has been running at nearly 18 percent of the total industry, about a percentage point higher than last year and well ahead of its decade-low of 13.3 percent in 2005.
Meantime, sales of hybrid cars are down 8.1 percent; compact car sales are up just 1.1 percent, reversing the recent trend of making up an ever-growing percentage of the total market.
Little new product came into either the hybrid or small car segments, except for the Ford Fiesta and its cousin, the Mazda2, which were introduced midyear. Stable gas prices throughout the year also proved no incentive to drive buyers to fuel sippers.
In addition, budget-strapped small car buyers were most likely hardest hit but the recession and thus frozen out of the new car market, especially as credit availability was particularly limited for them. They likely bought used cars if they bought at all.
Lower Incentives, Except for Japanese
Edmunds.com's True Cost of Incentives (TCI) data showed that incentives fell for domestic, European and Korean brands compared to 2009, but Japanese automakers increased their incentives this year, largely as Toyota tried recoup from recalls and negative publicity that triggered a sales slum with incentives including unprecedented zero-percent financing.
While Japanese brands remained the lowest in average incentive spending with $1,968 per car sold this year, it was still a notable increase from the $1,637 spent per car last year.
U.S. makes averaged $3,333 in incentives per car sold versus $3,766 in 2009, while Korean brands averaged $1,820, down from $2,721 last year. The European makes had the greatest decline in incentives, averaging $2,491 in spending per car, down from $3,295 in 2009.
Edmunds.com's monthly True Cost of Incentives report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.
Used Car Prices Soar
All year used cars generally ran 10 to 15 percent higher than last year. Due to the economic downturn, car shoppers who had traditionally been new car buyers ultimately bought used. The average used-car transaction price is at $19,345 currently versus $16,586 in December 2009.
Consumers were willing to either substitute premium for non-premium cars or consider used and certified pre-owned cars instead of new. Ironically, thanks to reduced supply and increased demand, today many lightly used pre-owned cars are actually more expensive than new cars.
The supply of used cars is limited, though, so Edmunds.com analysts expect 2010 used car sales to be up by only 3.7 percent compared to 2008 to 2009 - while new car sales are up 11.6 percent.
Recalled Vehicles, Complaints Up
According to Edmunds.com's analysis of National Highway Traffic Safety Administration (NHTSA) data, safety recalls affected 19.1 million vehicles in 2010, up dramatically from the 13.4 million vehicle annual average from 2005-2009.
Nearly 41,000 complaints had been registered for model years 2005-2010 in the NHTSA database so far this year -- more than more twice that in 2009.
"Looking at the year-over-year trends, typically the number of complaints goes up between 3,000 and 5,000 annually as more people discover the online complaints submission process. However, the Toyota recalls cast a much brighter spotlight on this process. It will be interesting to see if the trend continues into the future when recalls aren't earning front page headlines," commented Analyst Panee Segal. Despite all the attention to recalls this year, the number of NHTSA recall campaigns declined to 165 in 2010, compared to 175 in 2009.
Vehicles More Laden with Technology
Technology continues to get more deeply imbedded in our cars and, for the most part, helps make cars safer, more efficient and more convenient. Among the Top 10 Car Technologies for 2010 that Edmunds.com identified were:
Volvo's Pedestrian Detection with Full Auto Brake, which uses radar and a camera to identify pedestrians in front of the car and automatically bring it to a halt
Infiniti Eco Pedal, an accelerator pedal that pushes back to let drivers know they are wasting fuel
GM's OnStar MyLink app, which allows drivers using smartphones to locate their car in a crowded parking lot and lock or unlock the doors, and has a variety of other convenience features.
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