Are Americans Ready to Buy Cars Again?

Today, GM (NYSE: GM) reported that US December vehicle sales rose 4.5% from November against a 4.4% analyst estimate. A detailed breakdown of the numbers reveals that the company's Chevy Volt yearly sales fell well below guidance, as GM sold 7,671 Volts against a goal of 10,000 units. The company has not revived itself with as much enthusiasm as its primary rival Ford (NYSE: F) and its stock price has suffered as a result, falling nearly 37% from its 2010 IPO price.

GM has not experienced the same revitalization that Ford has over the past year. While many automotive publications have noted that new cars such as the Chevy Cruze and Equinox have been improved from previous offerings, they still do not hold up to the revamped lineup that Ford has offered of late. The company has also relied on large discounts and sales incentives on aging vehicles such as the Malibu to buy time for their replacements to arrive. As a result, GM estimated that it only was able to increase its U.S. market share by 0.5% in 2011.

The failure of the Chevy Volt to sell 10,000 units is troubling given the car's status as GM's halo car. GM had long touted the car as a showcase of the brand's technological prowess and a symbol of where the company was headed in the future. Unfortunately, limited battery range and a government investigation of a crash test fire made some customers weary of spending $40,000 on the car. The debut of cheaper electric vehicles such as the Nissan Leaf and Mitsubishi MiEV gave customers genuine alternatives.

While Ford only recently unveiled its electric Focus sedan, its overhauled product lineup has struck a chord with customers. The company has redesigned its entire line over the past few years, with the redesigned Explorer and Taurus among its most popular models. Customers have also gravitated to its strong small car offerings in the Fiesta and Focus as high fuel prices continue to remain in the minds of drivers. The company reported that small car sales had jumped 25% in 2011.

Ford's stock price also struggled in 2011, as it fell nearly 38%. In a conference call today, the company stated that December sales had jumped 10% over the previous month. The company stated that its measure of economic indicators forecasted positive momentum in 2012. An improving economy, along with customer demand to replace aging vehicles that were held during the recession could combine to make 2012 a very successful year for Ford.

Despite an improving U.S. market, both companies face risks in the European market. Ford stated that it expected weak growth in European sales in 2012, a troubling statement given how much development of Ford vehicles occurs there. For many years, automotive reviewers had lamented the fact that European Ford vehicles were superior to their American counterparts. GM does not have the same exposure to Europe, but have been attempting to expand their brand there for years.

Both Ford and GM have come a long way since their 2008 lows. However, GM clearly has work to do until it can catch its American rival with regards to vehicle appeal. While the company can continue on name recognition and appeal for buying American, customers will soon come to demand more.