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Automobile sales steadily increasing ; Year-over-year gains still not at pre-recession levels

When viewers tune into Super Bowl XLV early next year, one of every three ads they see will be for cars or trucks. It's an unprecedented advertising blitz for an industry beleaguered by a recession that scared consumers off the showroom floors.

The automotive Super Bowl blowout, where each 30-second ad sells for up to $3 million, suggests the industry is back. So do recent monthly sales reports showing year-over-year gains in October and November.

But automakers are nowhere near the sales volume they showed as little as four years ago, before the stock market and the housing sector tanked and took the rest of the economy with them.

And it likely will take several years before the industry gets back to the levels earlier in the decade when it routinely sold more than 16 million vehicles a year, instead of the 11.5 million it's projected to sell this year.

"The sales base is very favorable for a positive trend because sales last year were relatively low," said Akshay Rao, marketing professor at the University of Minnesota's Carlson School of Management. "I don't know when sales will equal what they were three or four years ago. It depends on the economy and the new normal with respect to dependence on the automobile."

But the economic reality is that the United States still has not fully recovered from the recession, and unemployment remains stubbornly high.

At the height of the crisis, two of the largest auto manufacturers -- GM and Chrysler -- needed a government bailout in order to survive.

But circumstances can change quickly. GM's initial public offering was enthusiastically received by investors last month. And sales of domestic vehicles have been particularly strong during this mini-rebound. Ford sales were up 19 percent for the first 11 months of 2010, according to Automotive News.

Chrysler sales, meanwhile, were up 17 percent; General Motors, 7 percent. Toyota, one of the top imports, had relatively flat sales, hindered by a series of recalls over the last year.

Auto experts are divided on whether car sales are a leading or lagging economic indicator.

Scott Lambert, executive vice president of the Minnesota Automobile Dealers Association, said one of his members predicted the recession two years ago based on sales trends he saw in his store.

"One of my dealers said, 'we're in trouble.' He said housing contractors weren't coming in for new trucks," Lambert recalled. And then the housing market tanked.

"We follow with the housing market," Lambert said of the auto industry.

Jesse Toprak, vice president of auto trends at TrueCar.com, noted that both the stock market and new car sales are up 10 percent, suggesting that improved performance on Wall Street stimulated consumer confidence in the auto market. Toprak said he expects car sales to rise to 12.7 million vehicles next year and 13.9 million in 2012.

"Beyond that it's anybody's guess," he said.

Others believe pent-up demand caused by an aging fleet of vehicles purchased five or more years ago is driving the rise in sales today, despite the uncertain economy.

Paul Taylor, chief economist of the National Automobile Dealers Association, said the average age of cars and trucks on the road today is 10 years, with 120,000 miles behind them. "Many consumers simply will feel the need to buy a new car or truck," Taylor said.

Chris Hopson, a market analyst for IHS Automotive, agrees: "People have been holding on to their cars longer. It's pent-up demand."

Coincidentally, vehicles purchased during the two most popular incentive programs ever offered -- 0 percent financing and auto employee-level discounts -- are nine- and five-years old respectively.

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