Auto sales revenue growth reveals industry’s strength, opportunity, TrueCar reports

Auto salesAuto sales should generate more than $500 million in total revenue this year, significantly more than just five years ago and a good sign of the industry’s strength, according to a report from TrueCar Inc.

TrueCar expects total sales of $521.5 billion this year compared to $292 billion in 2009.

Nearly 80 percent growth in revenue surpasses 58 percent growth in unit sales over the same period, TrueCar reports, in part because of increasing transaction prices.

“Looking solely at industry volumes without factoring in the richer margins and revenue generated by three of the four vehicle segments masks how truly robust the industry is,” said TrueCar, which suggests that sales revenue is a better measure of industry health than unit sales.

The industry average price per vehicle purchased was $33,361 in October, reported Kelley Blue Book, while the average new-vehicle transaction price in 2009 was around $26,000.

Industry trends across the four distinct product categories, or “super segments,” show a current consumer-driven mix of 30 percent mass-market cars, 30 percent mass-market utility vehicles, 20 percent pickup trucks and 20 percent premium brand vehicles of all types.

“Utility vehicles, especially small and mid-size, are the story once again, as consumers are buying more and are willing to pay more for these models,” said Alec Gutierrez, senior analyst for KBB. “With gas prices at a three-year low and consumer confidence at a seven-year high, this trend should continue.”

During the 2009-14 period, pickups and mass-market utilities, which deliver higher transaction prices and margins than mass-market cars, increased their share of industry to 50 percent from 44 percent.

But none of the automakers is positioned to take full advantage of consumer preferences, even as unit sales climbs toward 16.4 million for the year – the best total since 2007 – and could reach 17 million in 2015 if the economy continues to improve and automakers increase incentives.

“For individual automakers, the revenue mix across the four super segments varies considerably,” said John Krafcik, president of TrueCar, in a recent Automotive Press Association presentation.

“Some are overly reliant on mass-market cars – notably Volkswagen Group and Hyundai-Kia – while others are significantly overweighted in pickup and utility segments, such as Fiat Chrysler. Remarkably, no automaker has a revenue mix even close to the consumer-driven industry mix.”

But that also means there may be opportunity for the major automakers to broaden their portfolios and “create more revenue-balanced OEM groups,” Krafcik said.

 

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