Car makers led by General Motors and Ford say that sales of cars and lorries are set for their best year since 2007 despite government spending cuts in the United States.
Vehicles on US roads are the oldest on average in history, and Americans will continue to look to replace them with more fuel-efficient models also equipped with better technology features, the car makers' sales executives said on Friday. Ford reported its best February sales in six years.
"It's inevitable there might be a slight, slight offset, but I think the positive factors" boosting demand "will overcome", Ken Czubay, Ford's vice president of US marketing, sales and service, said.
US light-vehicle sales last month rose 3.7 per cent to 1.19 million. The annualised sales rate, which is adjusted for seasonal trends, rose to 15.4 million from 14.5 million a year earlier.
Ford's deliveries of cars and light lorries last month climbed 9.3 per cent, GM's jumped 7.2 per cent, Toyota's increased 4.3 per cent and Chrysler's rose 4.1 per cent, according to company statements.
The cuts, known as sequestration, total US$1.2 trillion (Dh4.4tn) over nine years. Of that total, $85 billion would occur in the remaining seven months of this fiscal year. President Barack Obama on Friday warned of a "slow grind" on the economy.
New-car buyers, shunned by lenders just four years ago, are now benefiting from low interest rates and better availability of financing. Car sales rebounded from the US recession that ended in 2009 more quickly than housing did, boosting the economy as volumes approach pre-recession levels.
Banks reported the most common rate for a 48-month new-car loan was 4.82 per cent in November, the most recent reporting period. The rates have dropped from more than 7 per cent before the Fed lowered its target interest rate to zero in December 2008 and began large-scale asset purchases to boost growth.
"People quite frankly have become completely numb to that whole budget issue," Al Castignetti, Nissan's vice president of US sales, said, adding that consumers would "absolutely not" pull back in March because of the spending cuts. "Consumer confidence is on the rise. People are taking advantage of the low interest rates."
Ford has said its outlook is for about 2 per cent to 2.5 per cent growth for the US economy this year. Full implementation of the sequester may represent a "drag" on GDP of about half a percentage point, Ellen Hughes-Cromwick, Ford's chief economist, said.
"I think people will keep on buying," Sergio Marchionne, Chrysler's chief executive said.
GM, which has been targeting lower full-sized pickup inventory ahead of the release of new lorries this year, reduced its stock of those models to 97 days' supply from 117 at the end of January. Sales of Chevrolet Silverado pickups rose 29 per cent in February, while GMC Sierra surged 25 per cent, the Detroit- based company said.
Large pickups make up one of the main sources of profit for GM, Ford and Chrysler.
* Bloomberg News