as part of our
U.S. new car sales rose sharply in August, according to two
leading industry sources. And there's reason to believe that the
big jump could be the start of a longer-term cycle.
According to leading auto industry research firm Edmunds, August
car sales jumped 20% from the same month a year ago, to 1.29
million vehicles. Sales were also up 12% from July. Japanese
companies led the way, with sales at
) soaring 61%, followed by
), which saw its sales rise 42%, and
(Other OTC: NSANY.PK), where sales jumped 13%.
The Detroit Three saw more modest gains, with sales at Chrysler
rising 12% on the month,
) increasing by 9.8% and
) seeing a 6.4% rise.
TrueCar.com largely backed up Edmunds' findings, showing a 17%
increase in U.S. car sales in August.
"Sales showed signs of flattening out in the first couple months
of summer, so August's sales figures will come as a nice surprise
for everyone in the auto industry," said Edmunds' senior analyst
Many Old Clunkers are Nearing the End of The
One factor driving new car sales is the sheer age of the
country's current vehicle fleet. According to R.L. Polk and Co.,
the average U.S. car was 10.8 years old in 2011-an all-time high.
That mainly reflects the fact that Americans held off on new car
purchases during the recession.
Instead of trading up, drivers have been doing all they can to
keep their old rides on the road. This is the main reason why auto
parts sellers like
) have seen their
in the past few years-while two of the Detroit Three carmakers were
forced into Chapter 11 bankruptcy protection.
Still, you can only keep an old car going for so long before the
mounting repair bills start to eat up any money you're saving by
holding out. When you combine that with greater incentives from
carmakers-particularly as they look to clear out space for new 2013
models-and a continuing economic recovery, it looks like more and
more shiny new vehicles will be driving off the nation's car lots
in the coming months.
High Gas Prices Give Small Cars Big-Time Appeal
As many U.S. cars head for the scrap heap, gas prices continue
to rise: the average pump price in the U.S. was $3.83 a gallon on
Friday, up $0.21 from a year ago. It also broke the Labor Day
record of $3.68 a gallon.
That's largely due to the impact of Hurricane Isaac, which
closed refineries on the Gulf Coast. But consider that for the
entire month of August, gas prices are up $0.31-or 9.2%-from August
Concerns about rising fuel prices, along with increased
awareness of environmental issues like climate change, have
prompted many consumers to switch to smaller, more fuel efficient
vehicles. Ford, for example, recently said that its Focus compact
is on track to become the world's best-selling car, passing another
long-time top seller in this space, the Toyota Corolla.
Reliability Is More Important Than Ever Before
Along with increased fuel efficiency, cost-conscious
post-recession buyers are placing a higher-than-ever premium on
longevity and reliability. That's a place where Honda, in
particular, really shines.
Two of the company's cars, the Civic and the Accord, recently
grabbed the number two and three spots on AutoGuide.com's list of
the top 10 most reliable family cars. "This list would probably
have no credibility if the Honda Civic didn't appear on it," said
AutoGuide. "For decades now, the Civic has become synonymous with
reliability and dependability, not to mention affordability."
Further bolstering the Civic's image is the fact that it was
also recently named the most reliable used car in the U.K. based on
a survey by
magazine and Warranty Direct. It was the seventh straight year that
the Civic won the title. "Reliability is so important to motorists,
especially when times are tough," said Chas Hallett, the magazine's
editor-in-chief. "Honda is exceptionally good at this."
Honda Is Rebounding Quickly From Last Year's Natural
The company had a rough 2011. First the Japanese
earthquake/tsunami/nuclear meltdown in March shuttered a number of
its factories, then flooding in Thailand caused parts shortages
that weighed on its sales. The low year-earlier numbers were one of
the reasons why it has seen such big sales increases so far this
In its latest fiscal quarter, which ended June 30, 3012, Honda's
overall sales surged 42.1%, to 2.44 trillion yen, or $30.7 billion.
The company saw strong gains in all of its regions except for two:
Europe, where sales fell 2.0%, and South America, the Middle East,
Africa and Asia, where revenue declined a combined 4.2%. Both
setbacks were largely due to the negative impact of foreign
Net profits jumped 314.3% from the year-ago quarter, to 131.7
billion yen, or $1.7 billion.
The continued strength of the Japanese yen is a drawback to
investing in Honda, because it continues to reduce the value of the
company's overseas sales (In the last quarter, 82% of Honda's
revenue came from outside Japan). Still, the company continues to
forecast a $6-billion profit for its fiscal year ending March 2013,
more than double its earnings in the previous year. It also expects
to sell 4.3 million vehicles in the current year, up 38.4%, with
North America supplying 40% of the total.
The company also benefits from its diversified business, which
sets it apart from many other automakers: in addition to cars, it
makes motorcycles and power equipment, such as lawn mowers, snow
blowers and generators. The motorcycle business is an ongoing
bright spot for Honda: in the latest quarter, it sold 2.4 million
units, up 21.4% from a year ago.
To top it off, Honda pays an attractive dividend compared to
many other automotive stocks: Quarterly payments of 19 yen per
share ($0.24 U.S.) yield 2.5%. Honda isn't the only company paying
an attractive dividend in this market. Check out
The Top 5 Companies that Pay Dividends
for more low-risk picks that pay dividends above 5%.
Article originally posted