Auto Sales Reveal a Recovery That’s Built to Last
U.S. auto sales kicked into overdrive in August suggesting maybe the economy isn’t so bad after all. Sales increased 17% for the month pushing the annual sales rate to over 16 million for the first time since 2007. AutoNation, Inc.(NYSE:AN) got more than its fair share of the growth as it saw 32% gains in August, its best month in a decade. CEO Mike Jackson tells Breakout the gains are being driven by pent up demand and a sustainable economic recovery.
“We had a depression in automotive. When people stopped buying cars in 2008, 2009 and 2010 that pushed the average age up to over 11 years,” Jackson points out in the attached clip. Customers coming into dealerships will find cars that get 24.6 MPG on average; more than 20% higher than what was seen in October of ’07. That mileage boost reflects a vast improvement in cars across the board as the financial crisis forced the industry to get better or die.
Better product is only part of the story and replacing an ancient clunker wouldn’t account for a run rate above 16 million. Cars are the quintessential big ticket discretionary item which is a fancy way of saying no one is going to spend $30,000 on something they don’t need unless they have a job. While GDP is stuck somewhere around 2%, annual auto sales have grown by more than 38% since August of 2011. Jackson takes the improvement as evidence that the economic recovery is self-sustaining.
You can see the full “Breakout” segment below: