Auto sales defy positive statistical trends

July 1, 2010

Auto sales should be accelerating in the United States — at least according to a slew of rosy statistics. But June’s numbers show annual sales stuck in the low 11 million range — better than last year, but way off the typical rate of 16 million before the crash. If only customers weren’t so jittery about the economy.

That’s what’s quelling the optimism fueled by positive-looking data. First, there are stats suggesting pent-up demand. The median age of vehicles on the road, for example, is more than 10 years, rather than the eight or nine years to which the industry has become accustomed.

The annual scrappage rate of 3 to 4 percent of the 250 million vehicles on the road is low, too. It usually hovers around 5 percent. That means as many as five million vehicles are still cruising around that otherwise would have been retired to the junk yard by now.

Then factor in the two million new drivers each year. And consider that the value of second-hand cars increased almost 11 percent in May year-on-year, according to the Manheim index, which tracks used-car auction data. Prices jumped as much as 19 percent for more fuel-efficient cars and more than 14 percent for large SUVs. The more cash drivers get for old vehicles, the more likely they should be to splash out on a brand new runabout.

All else being equal, this suggests annual sales of 14 million should be within reach. The trouble is, customers remain wary of buying big-ticket items. Unemployment is still stubbornly high. Many baby boomers, who buy almost half of all new vehicles, must be rethinking retirement plans after the crisis. And financing, though improved, is still not as easy to come by. Using home equity as an ATM machine is a thing of the past for now.

All of which leaves Big Auto’s strategy eggheads in a fix. There’s so much data screaming an upturn could be just round the corner. But consumer behavior has thrown a spanner in the gears. That makes gauging a rebound nigh on impossible.

Comments

“There’s so much data screaming an upturn could be just round the corner.”

Get real Antony, data don’t buy cars, people do.

If you are one of the 10% sitting at home, would you run out and buy a new car?

Posted by doctorjay317 | Report as abusive
 

The market was flooded by the leasing trend, another bit of pain brought to you by the banking industry.

All of the money that was made on the leasing programs went to pay huge bonuses that are now in offshore bank accounts avoiding taxes.

Another gift from the crypt keeper himself, Alan Greenspan, who decided the best way to do his job was to not do it at all.

Posted by jstaf | Report as abusive
 

“There’s so much data screaming an upturn could be just round the corner.”

There’s also everyday reality, where most of us live, and this reality tells people unequivocally:
-”Be careful, don’t spend, the recovery story sounds great – but you know it’s just a story.”

Posted by yr2009 | Report as abusive
 

Unemployment is still high, contrary to what all the pundits are saying there is little sign of a recovery; hence people will only replace vehicles they have too.
Hence, we have a steady market for replacements, but very little market for buying on good advertizing.

Posted by The1eyedman | Report as abusive
 

Why do these talking head writers keep referring back to the post crash heyday and assuming we’re heading straight back to that? That’s so ludicrous that it is stupifying! The consumer economy is on ice – that means cars too. The fact that America is even in the 11m annualized range is amazing frankly; guess because no one is buying homes…

Posted by CDNrebel | Report as abusive
 

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