Auto sales defy positive statistical trends
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.