Toyota, Honda begin to rebuild

The big sales winners of 2011 will try to hold off a resurgent Japanese giants

An early trend: Last year's three big sales winners -- Chrysler Group, Hyundai-Kia and Volkswagen of America -- continued to drive the market in January.

An early subplot: American Honda and Toyota Motor Sales U.S.A. have begun their long-awaited sales recoveries after a tough 2011. How much lost market share will they win back, and where will it come from?

A surprisingly strong January -- up 11 percent from January 2011 and the best January since 2008 -- seemed to preview that battle, in an optimistic setting. The 913,284 light-vehicle sales translated to a seasonally adjusted rate of 14.2 million, matching the cash-for-clunkers frenzy of August 2009 and well above December's 13.6 million pace.

The January SAAR "is 1 million over the early-month expectations," said Adam Jonas, top auto analyst at Morgan Stanley. "Our 14 million sales forecast is officially under review for positive revision."

"It's significant to see 900,000 in January when much of the country typically is in a deep freeze," said Toyota Division General Manager Bob Carter. "We're bullish with where the industry is going."

Chrysler Group sales surged 44 percent, VW group was up 40 percent and Hyundai-Kia rose 20 percent. And all three were going up against strong January 2011 figures.

But after losing volume last year because of product shortages caused by natural disasters, Toyota group sales rose 8 percent in January, and American Honda climbed 9 percent. And those comparisons were against a relatively normal January 2011, before the Japan earthquake.

Before January, American Honda's sales declined in every month since May. Toyota sales were down or flat in seven of the previous eight months.

Inventory levels still aren't back to normal for either company. But Toyota Motor Sales' market share in January was 0.7 points higher than the 12.9 percent share it achieved for the 2011 calendar year. American Honda was up 0.1 point from its 9.0 percent in 2011.

In 2011, the two Japanese groups lost a combined 3.9 share points. Meanwhile, Chrysler picked up 1.3 points, Hyundai-Kia added 1.1, General Motors gained 0.5 and VW picked up 0.4.

The coming battle

Analysts expect the battle to be in full force by the end of March, when Toyota and Honda expect full inventories.

Still, TrueCar.com analyst Jesse Toprak predicts Toyota and Honda won't regain more than half of the share they lost last year.

"The competition is so much better and customer loyalty is not what it used to be," he said. "The danger is that consumers have found out there are other good cars out there."

Toprak expects most of the share the two Japanese automakers regain to come half from Hyundai-Kia and half from the Detroit 3.

Analyst George Magliano of IHS Automotive expects Toyota and Honda to regain only about a fifth of their lost share during 2012 -- and he says it will come entirely from GM and Chrysler. He sees Hyundai-Kia continuing to grow.

"Toyota is still feeling the effects of the recall and, along with Honda, is hurt by the strong yen," he said.

"GM still has issues on the product side as the Silverado ages. Chrysler has some upside potential, especially later in the year if the Dodge Dart takes off from the start."

Last month Nissan North America sales increased 10 percent, while Ford Motor Co. volume gained 7 percent, both just below the industry average of 11 percent.

The only major player to lose volume in January was GM, down 6 percent. But GM's decline is distorted because it's coming off an incentive-driven surge in January 2010.

The company's January market share fell 3.4 points from a year earlier but was only 1.2 points lower than its full 2011 average.

GM U.S. sales boss Don Johnson expects a gradual improvement in consumer sentiment.

"We're seeing a continuation of the kind of growth and sentiment that we saw start to pick up in the fourth quarter," he said.

Caught by surprise

Jonas of Morgan Stanley wasn't the only analyst to be caught by surprise by the January surge.

TrueCar.com, Wells Fargo Securities and Kelley Blue Book also are rethinking 2012 sales forecasts as a result.

Kelley Blue Book analyst Alec Gutierrez did not officially revise his 13.3 million sales forecast for the full year. But he said "sales are on pace to surpass" that level.

In December, Jonas was the highest and Gutierrez toward the low end of 11 analysts Automotive News asked to forecast 2012 U.S. auto sales. The forecasts ranged from 13 million to 14 million and averaged 13.6 million, which would be up 6 percent from 2011's 12.8 million sales.

Jonas and Gutierrez cited as a positive factor a large number of new and redesigned vehicles hitting the market this year, starting in the second quarter.

For example, Carter said Toyota will launch 19 new or updated models this year as it tries to regain lost market share.

"About 40 percent of the vehicles we sell this year will be new or significantly updated models, compared to just 7 percent last year," he said.

Consumers are becoming more interested in new vehicles and advanced technology and less concerned about the economy, Toprak said.

"It's starting to feel like the good old days, when people got worked up about new products," he said.

Several executives and analysts cautioned that January is often a volatile month, but optimism about 2012 is growing because of the month's strong sales.

"It's too soon to declare victory," Toprak said. "But there's a very good chance we can get to that magic 14 million level this year if this pace continues."

Shifting shares
For the first time in months, market share for Toyota Motor Sales and American Honda moved upward in January.
	Jan. 2012	Jan-Dec.2011
General Motors	18.40%	19.60%
Ford Motor	14.9	16.8
Toyota Motor Sales	13.6	12.9
Chrysler Group	11.1	10.7
American Honda	9.1	9
Nissan North America	8.7	8.2
Hyundai-Kia Automotive	8.6	8.9
Volkswagen of America	4	3.5
Source: Automotive News Data Center, automakers

Jesse Snyder - Automotive News