Could the auto industry be even hotter than we thought?
The car world tends to focus on units sold, which is to say the total number of vehicles rolling out of dealerships during any given period. This year, Americans are on pace to buy about 16.4 million vehicles, a 6 percent increase from 2013 and the most purchased in the nation since 2006.
Here’s the development no one is mentioning: Americans are spending a whole lot more money per car. Since 2009 the annual revenue from U.S. car sales has surged 61 percent, to $522 billion, according to analysis from TrueCar (TRUE), an online platform that connects car buyers with dealerships. As a result, the average cost of a new vehicle sold has surged from $31,077 to $31,798.
TrueCar President John Krafcik, formerly the chief executive officer of Hyundai North America (005380:KS), has been preaching about this purchasing power as he makes the rounds in Detroit. He says analysts are underestimating the health of the U.S. auto industry.
“It’s extraordinarily relevant that people are willing to pay more for automobiles,” he told Bloomberg Businessweek. “Especially when the narrative has largely been that cars are playing less of a role in our lives.”
Find out which four factors contribute to American’s paying more for cars.