Auto sales saved the economy in 2012

The Washington PostJanuary 1, 2013 

Ford

United Auto Workers assemblyman Mike Strodeski lifts a hybrid-electric transmission at Ford's Van Dyke Transmission Plant in Sterling Heights, Mich., Thursday, Aug. 2, 2012. Ford says it's investing $220 million in the transmission plant to make the new hybrid-electric transmission. The new transmission is the first designed and produced entirely be Ford, which used to get its hybrid transmissions from a Japanese supplier. (AP Photo/Carlos Osorio)

CARLOS OSORIO — AP

— It’s not too much of an exaggeration to say the U.S. economy was powered by car sales in 2012.

Auto companies are now expected to have sold 14.5 million new vehicles in 2012, according to Kelley Blue Book. That’s a 13  percent rise over last year and the highest number of sales since the financial crisis hit.

If cars hadn’t been flying out of dealerships, the year would have looked considerably bleaker. Vehicle purchases by consumers alone accounted for roughly 30 percent of all economic growth in the first half of the year, according to Credit Suisse.

What made this car-buying frenzy so striking is that 2012 also happened to be a terrible year for car recalls. As auto analyst Jim Gorzelany reports, automakers had to recall some 14.3 million vehicles over the past year because of various defects – everything from steering issues to power-window problems.

But that didn’t slow car sales one bit. Indeed, as Gorzelany explains, Toyota and Honda had to issue the greatest number of recalls in 2012 – Toyota with 5 million, Honda with nearly 3.4 million. Yet both companies increased their market share this year: Toyota’s sales were up some 17.3 percent over last year, while Honda’s were up nearly 25 percent.

Toyota and Honda had a bad year in 2011 in part because their supply chains were hurt by the big earthquake in Japan and a tsunami in Southeast Asia, so some rebound was expected.

But it wasn’t just these two Japanese companies; General Motors had to recall 1.3 million vehicles. Ford had to recall 1.1 million. Just about every major car company had to issue at least one recall this year. But Americans kept buying cars en masse anyway.

Why is that? One theory is that consumers simply aren’t troubled by manufacturing recalls, especially if they’re from a company like Toyota that has a reputation for reliability. A study this year from N.C. State University found that Toyota’s infamous 2009 safety recalls – a result of concerns over “sudden unintended acceleration” – made virtually no dent in how people perceived the brand.

Another possibility is that consumers can’t really afford not to buy cars at this point. Back in January, the typical car on the road was a record 10.8 years old. Most people had put off replacing their vehicles during the downturn, and their cars and trucks were becoming ancient.

If so, that’s relatively good news for 2013. Despite all the strong sales, the average age of cars on the road has now risen even higher, to just over 11 years old. That’s one reason why many analysts predict the auto industry will keep growing next year and keep bolstering the U.S. economy. And at this point, it seems like very little – not the “fiscal cliff,” not a spate of recalls – can slow things down.

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