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Health of Auto Industry Measured by More than Sales

Health of Auto Industry Measured by More than Sales

By Jeff Youngs, October 14, 2014

The U.S. automotive industry has experienced unprecedented growth in the average price of new vehicles in the past five years, according to the Power Information Network(R) (PIN) from J.D. Power. While the monthly volume of new-vehicle sales has traditionally been the primary determinant of the health of the U.S. auto industry, this leap in price performance must be considered another key indicator.

The average transaction price of new vehicles has risen from $25,700 in 2009 to more than $29,600 thus far in 2014, according to PIN. Meanwhile, retail sales of new vehicles through the first nine months of 2014 stand at their highest level since 2005. This combination of increasing sales and transaction prices means the value of retail vehicles purchased in 2014 is likely to be the highest on record for any calendar year: a projected $407 billion.

"When defining success in the auto industry, whether it is for a specific segment, manufacturer or model, it's important to look beyond basic sales figures," said Thomas King, vice president of PIN. "With the rapid growth of average transaction prices over the past few years, success needs to be defined more broadly to include overall revenues in addition to sales volumes."

Consideration of both sales volume and average transaction price is especially important in view of the fact that some vehicle segments deliver stronger volumes and lower price growth, and others greater price growth and weaker sales. For example, retail sales in the large pickup segment through September 2014 are up 4.6% compared with the same period in 2013, while retail sales overall have increased by 5.7%. However, the average retail transaction price of large pickups has risen by $2,700 (or 7.5%) year over year, while the industry has averaged only a $670, or a 2.3% increase.

In contrast, compact SUVs have demonstrated exceptional retail volume growth--up 22.1% thus far in 2014, compared with the first nine months of 2013--but the average transaction price for models in the segment has increased by an average of only $150, or 0.6%.

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