Another essential factor that is driving auto sales is the availability of easy credit, and it’s available at lower finance costs. Though sales incentives have fallen and several models have become dearer in the past few months, auto sales have not been hit as cheap credit is offsetting the lack of sales incentives offered by automakers. While several factors are working in favor of the automakers, what is it that they are doing to take care of their top and bottom lines?
Looking ahead
The auto sector is extremely concentrated and requires the industry giants to create well-designed cars to stay competitive. General Motors Company (NYSE:GM) has planned to put in $5 billion in its Opel brand to develop 23 fresh models. Overall, the company expects the operating profit to grow modestly as demand stemming from the U.S. and China remains strong.
Ford Motor Company (NYSE:F) is focusing on small cars, which is benefiting the company as its Ford Focus is selling in massive numbers. Though Europe is troubling the second-largest US automaker, its North American business, which is also dubbed the automaker’s ‘engine’ by chief executive Alan Mulally, is expected to post solid profits. The car maker has an eye on the emerging markets, particularly in China, where it has been witnessing encouraging sales numbers lately.
Toyota Motor Corporation (ADR) (NYSE:TM), on the other hand, is concentrating on lowering its global production costs and is simultaneously working on designing trendier models. The company recently shuffled its management and introduced three non-Japanese executives as heads of its global businesses.
To manage costs, the company plans to adopt the latest technology. In fact the car maker has already derived an adjustable assembly line which could be changed per demand. The company has plans to boost sales in the emerging markets; however, it has no intentions of building a new plant in the next three years. Instead it plans to utilize present capacity more efficiently to keep fixed costs under control.
The outlook
According to Finbar O’Neill of J.D. Power and Associates, the automobile market is going to grow healthier and stronger with the passage of time. The industry is expected to witness sales of over 15.3 million vehicles from 14.4 million last year.
GM’s Chief Executive Dan Akerson also expects strong demand in the next four-to- five years. The US auto industry outlook looks brigh,t as Americans have let loose their demand for cars to replace the old ones.
Though the overall sales gain has been softer compared to recent months, which delivered double-digit growth, easier credit, low interest rates and flashy car specifications continue to keep consumer spirits high.
Rajesh M. has no position in any stocks mentioned. The Motley Fool recommends Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM). The Motley Fool owns shares of Ford.
