Auto industry now sees fleet sales as source of profit

Article by Anita Panait, on September 6, 2013

Fleet sales of cars and trucks used to be unprofitable transactions for carmakers, earning it a reputation as an unpleasant aspect of the industry. But that perception is changing as carmakers are starting to make good money from fleet sales, which account for $65 billion of annual vehicle purchases in the United States and for a fifth of the industry’s total.

Carmakers had been losing money on fleet units – first when they sold them too cheaply, and second when they repurchased them back and resold them. But as carmakers shut down unnecessary sites and bring in vehicles that appease both retail and fleet buyers, they exercise more restraint in doing too many sales to fleet customers and now see profits out of fleet sales. Maryann Keller, an auto industry consultant and former director at Dollar Thrifty Automotive Group, remarked that fleet and even rental fleet are “no longer dirty words deserving of blanket criticism.”

She said that fleet sales are not unprofitable transactions, “or at least for the manufacturer, they don’t have to be.” According to analysts at LMC Automotive and Goldman Sachs Group Inc., vehicle sales to rental-car companies, utilities and governments are expected to account for around 15 percent of the auto industry’s total in August.

LMC expects August 2013 to be the best month for industry-wide sales since May 2007, citing “consistency in the fleet environment.” The industry is expected to post a 14-percent jump in overall sales in August 2013 to 1.47 million, according to the average of 10 analyst estimates surveyed by Bloomberg News. Carmakers are expected will report August results tomorrow. The annualized industry sales rate, adjusted for seasonal trends, is seen to surge to 15.8 million, according to the average of 17 estimates. [source: automotive news - sub. required]

Topics: profit

If you liked the article, share on:

Comments

Recommended

Opel revealed it has sweetened the pot for 2017 Insignia Grand Sport customers with the Opel Exclusive program. Through this program, the brand hopes to introduce a wide selection of...
by - February 22, 2017
Fireball Performance Cars has been known to make the fastest sixth generation LT1 Camaros in the world. Once again it has managed to walk the talk as it hit a...
by - February 22, 2017
The North American unit of German premium carmaker BMW is recalling around 19,000 units of its BMW i3 electric vehicle because of the risk of fuel leak. You may ask,...
by - February 22, 2017
A publication by the U.S. Patent and Trademark Office revealed that Honda is still looking into the Project 2&4 Concept. Officially unveiled during the 2015 Frankfurt Motor Show, the Project...
by - February 22, 2017
Barely a month before its official debut, Hyundai gave everyone a taste of what’s to come with the 2017 Hyundai i30 Wagon. Despite what little was shown, it did not...
by - February 22, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries