Riding on the retail demand from consumers, new car sales in the US is expected to rise 19 percent in August, to 1.3 million units, said Kelley Blue Book. The firm expects daily sales in August to be reduced by 1,000 units per day from July figures. This is because of the seasonal decline in fleet sales; however, the retail sales will remain flat month-over-month.

auto sales

The economy is still sluggish, but consumer confidence has improved. Car companies expect that the release of new models will further boost their sales during the second half of this year. Another factor pushing up the demand for new cars is the high price of used cars.

“Although economic jitters remain top-of-mind for many, those consumers seeking replacement vehicles continue to opt for new cars, with used-car values remaining high. Savvy consumers are likely opting to pay an extra $20 or $30 per month to buy or lease a new car, rather than settle for a used vehicle with 20,000 miles or more,” said Alec Gutierrez, senior analyst at Kelley Blue Book. Alec further said that unemployment may affect the car sales in the long-run.

The provider of used and new-car information expects annual car sales to be 14.4 million this year, with a significant increase in the sales of hybrid, subcompact, and compact cars. Hybrid car sales are expected to improve 24 percent, subcompact cars may climb 42 percent, and compact car sales will jump 31 percent from last year.

The biggest gainers will be TOYOTA MOTOR CORPORATION (TYO:7203) (NYSE:TM) and Honda, as they recover from inventory shortages, due to an earthquake in Japan last year. Kelley Blue Book expects TOYOTA MOTOR CORPORATION (TYO:7203) (NYSE:TM) sales to jump 37 percent, while Honda Motor Co Ltd (NYSE:HMC) (TYO:7267) sales could increase by 57 percent. Korean automaker, Hyundai, may witness a 20 percent increase, and Volkswagen AG (ETR:VOW) (FRA:VOW) is expected to gain 51 percent. Talking about the US manufacturers, Kelley Blue Book said Ford Motor Company (NYSE:F) and Chrysler are likely to climb 9.6 percent, with General Motors Company (NYSE:GM) rising only 3.4 percent.

From 1998 to 2007, an average of 17 million units were sold annually. However, after the economic crisis, the sales were – 10.4 million units in 2009, 11.6 million in 2010, and 12.8 million units in 2011. The European auto market has been deteriorating, and analysts fear that the contagion may spread in the US market.

Morgan Stanley notes:

Our top global picks. BorgWarner, Continental, Nissan, Kia Motors, Baoxin Auto, Bajaj Auto and Cheng Shin Rubber comprise our top picks from each major region.

Our industry views for North America, Korea and Taiwan are Attractive. In Europe, India and Japan our industry views are In-Line. Our view for the Chinese auto industry is Cautious.