Auto Sales Won’t Come Back As Fast As Expected
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DETROIT (WWJ) – While car sales won’t completely recover as fast as many analysts were expecting, a new report says domestic auto companies will get a growing part of that slowly recovering market.
“We think auto sales of 16 to 17 million units a year are not likely until after 2015,” said Edmunds chief economist Lacey Plache.
Plache was part of an Edmunds.com team of analysts briefing reporters in Detroit on the latest trends in auto sales. Their report cites slower than expected job growth, a weak housing market and stagnation in incomes as drags on the recovery. Six-point-eight million jobs lost in the recession still have not been replaced, according to the Edmunds economists.
The Edmunds forecast is for slow growth, with the sales rate improving to 13.9 million units in 2012 and 14.5 million in 2013.
In the near term, Edmunds CEO Jeremy Anwyl says sales fell in May because of higher prices and lower incentives. He says June appears to be a more “normal” month, now that prices have eased a bit.
Anwyl says we could see a temporary jump in sales in the fall, when Japanese products, that had been in short supply, start returning to the marketplace in large numbers.
Anwyl says domestic auto companies are gaining strength at the cost of import companies, particularly Toyota.
“I think it’s been one of those once in a lifetime opportunities.”
It’s comparable to the 1970’s when higher gasoline prices caused American buyers to start looking at Japanese cars. Anwyl says Toyota’s recalls and availability issues, have American consumers taking another look at American cars.
“It’s resetting expectations,” he said. “They are now thinking, ‘that Cruze is very good. That Focus is very good. It’s very similar to the process we saw in the early 70’s.”
It’s also caused buyers to stop thinking of Toyota as a special kind of carmaker.
“As of today they really have been dethroned,” says Edmunds senior analyst Jessica Caldwell, “They are not competing at the level they used to.”
Toyota also has a lot of vehicles that haven’t been updated recently, while there competitors–especially Ford and Hyundai–have done a better job of keeping their vehicles fresh.
In the past year, Toyota has seen a decline in the rate of customers it’s been able to capture from domestic brands. Domestics, however, have been able to capture more customers from imports, according to the Edmunds statistics.
This is a reversal of a trend that saw Toyota’s market share rise steadily for nearly two decades. Toyota went from 8 per cent of the market in 1991 to peak at a 17 per cent market share in 2009.
Toyota’s 10.2 per cent share in May was its worst showing since 2002.
This could mean better deals for consumers in the fall, as Toyota has more products in the marketplace, and wants to bring back customers. Edmunds says this could end up with several automakers launching very strong Labor Day weekend sales incentives.
While high gasoline prices have created a lot of interest in more fuel efficient vehicles, they haven’t had a huge impact on sales of hybrid vehicles.
“The hybrid share appears to have stalled from 2008 to 2010,” said Edmunds.com chief economist Lacey Plache.
Hybrid sales peaked at 2.9 per cent of the market in 2009, according to Edmunds figures, because of the federal “Cash for Clunkers” program.
The number of hybrid nameplates on the market has tripled since 2008, but sales have not followed pace.
“Car companies are clearly building more hybrids,” says Plache. “It’s not necessarily the case of ‘they build it, the buyers will come.”
The analysts are expecting near term hybrid sales to top out at 4 per cent of the overall market, with the possibility of reaching 5 per cent, if gas prices rise even more.
Longer term, younger buyers interest in higher fuel economy could cause hybrid share to rise more. But higher cost of hybrid vehicles could still restrain growth.
The Toyota Prius remains the top selling hybrid, getting more than half of hybrid sales. The Ford Fusion Hybrid and Honda Insight are tied for second place, with 8 per cent of hybrid sales.
Edmunds is projecting slow growth for hybrids, and even slower growth for pure electric vehicles. The analysts say the find President Obama’s goal of one million electric vehicles on the road by 2015, “Appealing, but not realistic.”
Follow Jeff Gilbert on Twitter @jefferygilbert