Easier credit, aging cars lead to predictions of sales growth in 201
What will 2012 bring for the auto industry?
Are consumers confident that the economy is going to do well, their jobs are secure, and they can make the mortgage or rent payment with money left for a car?
Are banks confident enough to make the loans consumers need to buy that vehicle?
The strength of the auto market depends on the strength of the economy.
"That's the single biggest challenge for 2012," said Joe Phillippi, principal of AutoTrends, an automotive research and consulting firm. "The job picture has gotten better and employment rates are better, but there still are underemployed and unemployed and that impacts the money banks will lend for a car and the amount consumers will spend on a car."
Sales forecasts for 2012 vary, with most predicting 13 million to 14 million units. That would be up from the 12.8 million cars and light trucks sold in 2011 and 11.6 million in 2010. It also would represent the third consecutive year of increases after sales tanked at 10.4 million in 2009, which resulted in plant closings, layoffs, production cuts, wage concessions and Chapter 11 filings by General Motors and Chrysler.
Paul Taylor, chief economist for the National Automobile Dealers Association, predicts sales of 13.9 million for 2012. Taylor insists that the aging vehicle population, easier credit and aggressive incentives from manufacturers will keep things rolling.
Most analysts join Taylor in citing an aging vehicle population for continued gains.
"The average age of vehicles on the road is now 11 years old and the rate of scrappage is not only the highest it's been since World War II, it's higher than the current new vehicle production rate," said Phillippi. "Sales could reach 14 million units in 2012."
Also encouraging is that banks' willingness to make car loans.
"Credit already is loosening, unlike two to three years ago when banks wouldn't lend any money," said Art Spinella, general manager of CNW Marketing Research, a company that looks at why people buy the vehicles they do. "Showroom traffic is up, and that's good. So the economy is growing, but still at a snail's pace. We look for sales to reach about 13.8 million in 2012, unless the economy falters, loans dry up, and then sales would only reach about 13 million units."
Rebecca Lindland, analyst with IHS Automotive agrees.
"People with money have given the market strength. Well-equipped cars and luxury models are doing well and transaction prices have risen," she noted, which fuels industry profits.
"But at the same time, sales could be 1.5 million units higher than they are because we're not seeing as many first-time, entry-level buyers coming into the market," Lindland said. "People (are) still concerned about jobs and are finding that the economic recovery is moving painfully slow. So rather than buy, they are delaying getting back into the market."
"
The Chicago Auto Show serves as a barometer of sales prospects and whether people visit the show out of an eagerness to commit to years of monthly payments, or simply to relieve cabin fever while waiting for better times.
"We keep tabs on the crowds and how it effects showroom traffic and sales during and after the show," said Dave Sloan, president of the Chicago Automobile Trade Association, show sponsor. "Advance ticket sales for both the show and the First Look for Charity preview night were up this year, and so was exhibit space — reasons to be optimistic that we'll see another year of growth."
Two major auto shows have been held in Los Angeles and Detroit, where crowds were large and enthusiastic "and the mood at both shows was positive and optimistic," noted Aaron Bragman, senior analyst with IHS Automotive.
Domestic automakers have plenty of reason for optimistism. They are starting to report profits, money that can be invested in new vehicles and technology that has been in short supply in recent years.
Besides the tough cuts, union concessions and less reliance on incentives, "the domestic industry has lowered its breakeven point by more than 1 million units so that even when it sells fewer vehicles than in the past, it still makes a profit and doesn't have to rely on incentives," said Dave Cole, chairman of Auto Harvest, an Internet site devoted to developing innovation and intellectual properties for the auto industry.
And this has help turn the $2,000-per-vehicle cost advantage once help by foreign manufacturers to the domestics.
"With a $2,000 advantage, foreign automakers set the prices that the domestics had to match, which they did by reducing content and therefore reducing value and profit. Now the domestic automakers enjoy the $2,000 cost advantage and they set prices and are the ones adding content and value," Cole points out, which is why economy cars are now sporting leather heated seats and Bluetooth hands-free phone technology.
Finally, a host of new vehicles on the auto-show circuit will fuel industry growth.
Cadillac has a new, entry-level sedan called ATS that will compete against the BMW 3-series. Cadillac's new XTS flagship sedan replaces the larger STS and DTS, while Buick taps into demand for smaller crossovers with Encore that's sized well below the midsize Enclave. Dodge brings back an old name — Dart — as a successor to the compact Caliber, while Ford takes the wraps off a redesigned midsize Fusion sedan offered with a choice of gas, gas-electric hybrid or plug-in battery power to satisfy those who want midsize performance and compact mileage.
Notice the emphasis on smal , including the compact 2012 Hyundai Elantra and entry-level 2012 Range Rover Evoque, voted North American Car and Truck of the Year by the nation's automotive press.
When talking small, however, there should be an asterisk.
"That's because small cars no longer have to be econoboxes that put you in the penalty box and make you suffer riding in them," says IHS's Bragman. "Small cars now offer not only 40 mpg, but are bigger, roomier, loaded with content and pleasant to spend time in."
Are consumers confident that the economy is going to do well, their jobs are secure, and they can make the mortgage or rent payment with money left for a car?
Are banks confident enough to make the loans consumers need to buy that vehicle?
The strength of the auto market depends on the strength of the economy.
"That's the single biggest challenge for 2012," said Joe Phillippi, principal of AutoTrends, an automotive research and consulting firm. "The job picture has gotten better and employment rates are better, but there still are underemployed and unemployed and that impacts the money banks will lend for a car and the amount consumers will spend on a car."
Sales forecasts for 2012 vary, with most predicting 13 million to 14 million units. That would be up from the 12.8 million cars and light trucks sold in 2011 and 11.6 million in 2010. It also would represent the third consecutive year of increases after sales tanked at 10.4 million in 2009, which resulted in plant closings, layoffs, production cuts, wage concessions and Chapter 11 filings by General Motors and Chrysler.
Paul Taylor, chief economist for the National Automobile Dealers Association, predicts sales of 13.9 million for 2012. Taylor insists that the aging vehicle population, easier credit and aggressive incentives from manufacturers will keep things rolling.
Most analysts join Taylor in citing an aging vehicle population for continued gains.
"The average age of vehicles on the road is now 11 years old and the rate of scrappage is not only the highest it's been since World War II, it's higher than the current new vehicle production rate," said Phillippi. "Sales could reach 14 million units in 2012."
Also encouraging is that banks' willingness to make car loans.
"Credit already is loosening, unlike two to three years ago when banks wouldn't lend any money," said Art Spinella, general manager of CNW Marketing Research, a company that looks at why people buy the vehicles they do. "Showroom traffic is up, and that's good. So the economy is growing, but still at a snail's pace. We look for sales to reach about 13.8 million in 2012, unless the economy falters, loans dry up, and then sales would only reach about 13 million units."
Rebecca Lindland, analyst with IHS Automotive agrees.
"People with money have given the market strength. Well-equipped cars and luxury models are doing well and transaction prices have risen," she noted, which fuels industry profits.
"But at the same time, sales could be 1.5 million units higher than they are because we're not seeing as many first-time, entry-level buyers coming into the market," Lindland said. "People (are) still concerned about jobs and are finding that the economic recovery is moving painfully slow. So rather than buy, they are delaying getting back into the market."
"
The Chicago Auto Show serves as a barometer of sales prospects and whether people visit the show out of an eagerness to commit to years of monthly payments, or simply to relieve cabin fever while waiting for better times.
"We keep tabs on the crowds and how it effects showroom traffic and sales during and after the show," said Dave Sloan, president of the Chicago Automobile Trade Association, show sponsor. "Advance ticket sales for both the show and the First Look for Charity preview night were up this year, and so was exhibit space — reasons to be optimistic that we'll see another year of growth."
Two major auto shows have been held in Los Angeles and Detroit, where crowds were large and enthusiastic "and the mood at both shows was positive and optimistic," noted Aaron Bragman, senior analyst with IHS Automotive.
Domestic automakers have plenty of reason for optimistism. They are starting to report profits, money that can be invested in new vehicles and technology that has been in short supply in recent years.
Besides the tough cuts, union concessions and less reliance on incentives, "the domestic industry has lowered its breakeven point by more than 1 million units so that even when it sells fewer vehicles than in the past, it still makes a profit and doesn't have to rely on incentives," said Dave Cole, chairman of Auto Harvest, an Internet site devoted to developing innovation and intellectual properties for the auto industry.
And this has help turn the $2,000-per-vehicle cost advantage once help by foreign manufacturers to the domestics.
"With a $2,000 advantage, foreign automakers set the prices that the domestics had to match, which they did by reducing content and therefore reducing value and profit. Now the domestic automakers enjoy the $2,000 cost advantage and they set prices and are the ones adding content and value," Cole points out, which is why economy cars are now sporting leather heated seats and Bluetooth hands-free phone technology.
Finally, a host of new vehicles on the auto-show circuit will fuel industry growth.
Cadillac has a new, entry-level sedan called ATS that will compete against the BMW 3-series. Cadillac's new XTS flagship sedan replaces the larger STS and DTS, while Buick taps into demand for smaller crossovers with Encore that's sized well below the midsize Enclave. Dodge brings back an old name — Dart — as a successor to the compact Caliber, while Ford takes the wraps off a redesigned midsize Fusion sedan offered with a choice of gas, gas-electric hybrid or plug-in battery power to satisfy those who want midsize performance and compact mileage.
Notice the emphasis on smal , including the compact 2012 Hyundai Elantra and entry-level 2012 Range Rover Evoque, voted North American Car and Truck of the Year by the nation's automotive press.
When talking small, however, there should be an asterisk.
"That's because small cars no longer have to be econoboxes that put you in the penalty box and make you suffer riding in them," says IHS's Bragman. "Small cars now offer not only 40 mpg, but are bigger, roomier, loaded with content and pleasant to spend time in."
No comments:
Post a Comment