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Yule-gift cars to ring in happy new year?
Question of the Day
In a holiday television tradition that has taken its place alongside Charlie Brown, Rudolph and the Grinch, the world's automakers are flooding the airwaves once again with commercials urging a high-dollar gift splurge from husband to wife — a shiny new car topped by a huge red bow on Christmas morning.
Employing that signature bow, Japanese luxury carmaker Lexus touts its "December to Remember" in ads on heavy rotation during December pro football telecasts. Rival Honda wishes us all "Happy Honda Days." More prosaically, General Motors invites us to celebrate its "Buick Holiday Event."
While for many Americans, such a gift remains out of reach in the still-struggling economy, the dream-come-true television ads may serve as a metaphor for the health of the auto industry as a whole, where sales are improving and there are deals to be had in nearly every segment.
General Motors and Chrysler needed taxpayer bailouts last year just to survive, but along with Ford Motor Co., Detroit's Big Three are rebounding. Foreign and domestic luxury manufacturers are predicting double-digit sales growth for 2010, and U.S. automakers say they are now focused on better days ahead.
In Germany, Mercedes Benz and BMW — both heavy seasonal advertisers this year — have shortened holiday breaks for autoworkers in response to the demand for sales. Audi, the luxury side of automaker Volkswagen, also plans to gear up production this month.
"When you see the luxury segment start to recover, it's a good sign for the rest of the economy," said Peter De Lorenzo, a Detroit-area auto analyst who operates the website autoextremist.com.
"In general, the auto industry is definitely on an upward trajectory," he added. "The luxury automakers, who took a big hit the last couple of years, are definitely showing signs of rebounding. It is probably a sign that the economy is not going to go gangbusters overnight, but is going to improve with slow and steady progress."
December has traditionally been a prime car-buying time of year, with dealers offering incentives and financing deals to clear the showroom before the new year models arrive in bulk. But the revival of U.S. consumer spending, coupled with the holiday ad blitz, is adding an extra kick to the close of 2010.
Holiday advertisements are normal for automakers, but some luxury makers have been running targeted, holiday-themed campaigns, replete with snow and winter images, in certain areas across the nation, urging consumers to take advantage of end-of-year promotions.
"The mainstream automakers have always had end-of-year sales," said Mr. De Lorenzo. "Now, luxury manufacturers are trying to wrap it up as the ultimate gift kind of thing."
Monthly auto sales surged 17 percent in November compared with November 2009, with all three U.S. automakers posting double-digit gains. Ford, which never sought federal aid, saw year-to-year sales jump 24 percent last month, while Chrysler was up 17 percent and GM up 11 percent.
Sales increases in the U.S. market were up even more for some foreign rivals, including South Korea-based Hyundai (up 45 percent) and Japan's Nissan (up 27 percent), but longtime global industry leader Toyota has struggled. Battered by bad publicity over its quality and safety record, Toyota said sales last month fell 3 percent.
"We're seeing consumers coming back in the marketplace, not just because they need a car, but because they want one, which is a significant change from the buying patterns we have seen in the last nearly two years," Jesse Toprak, an industry analyst at TrueCar.com told the Reuters news agency.
The Obama administration continues its push toward hybrid and new-technology vehicles for the government fleet, even as sales of such cars have not yet taken off with consumers.
Bloomberg News reported that the administration's purchases of GM and Ford hybrids by the General Services Administration accounted for close to one-fourth of all those type vehicles sold by the U.S. automakers. The vehicle rater J.D. Power and Associates projected sales of hybrids, plug-ins and electric vehicles to account for 2.2 percent of all auto sales this year.
Just in time for Christmas buyers, Chevrolet will begin sales of its much-anticipated Volt, a mass-market hybrid that runs on gasoline and electric power. It was named Motor Trend magazine's "Car of the Year" and outpaced Toyota's Prius on the EPA's fuel-economy rating, with a projected 60 miles per gallon. Nissan's new battery-powered Leaf also goes on sale this month.
While U.S. automakers stake their hopes on new technology, "there is no high-fiving," said Mr. De Lorenzo of recent improvements.
"There is no overconfidence, just a quiet belief that they are going in the right direction," he said. "They are going to stay focused, instead of smelling the roses. They know they got a new lease on life."
Whether the year-end deals are a bargain for consumers is another matter.
Edmunds.com, a Web-based consumer auto site, found that despite the heavy advertising and glossy commercials, the average incentive spending per car rose only $31 between October and November, when the holiday discounts were supposed to be kicking in. The average incentive per car in November was actually down $255 compared with November 2009, when auto dealers were desperate to lure any shoppers to the showroom.
And some consumer advocates have questioned the whole premise of surprising a spouse or loved one with a new SUV or a Euro-styled roadster on Christmas morning.
"I must admit, I've never understood the allure," Claes Bell, an analyst at the consumer financial website Bankrate.com, wrote in a recent post.
"Unless you're fortunate enough to be able to buy a car with cash as a present for a loved one, taking on a car payment and the other attendant costs of car ownership — insurance, registration, gas, parking, etc. — in the name of the short-term thrill of a magical Christmas morning seems foolish."
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