Age, Price And Economy Could Impact Future Car Sales
TRAVERSE CITY (WWJ) - Those who forecast future car sales have been tripping over each other to increase their future expectations. But are they about to be unpleasantly surprised?
Sean McAlindin, Executive Vice President of Research and Chief Economist for the Center for Auto Research doesn't expect to see a full year with 16 million vehicle sales until 2016. He says he's often asked by other analysts why his forecasts are the most pessimistic.
"I said none one of you is forecasting another recession, are you? Not one. Somebody's got to do it. I'm not impressed by our economy," he said.
Assuming there are no nasty economic surprises, most analysts speaking at the Management Briefing Seminars are forecasting slow, but steady growth. But there are definitely risks.
General Motors Chief Economist Mustafa Mohatarem says the recovery remains uneven.
"We've got a split economy where those that have jobs, those that have education are doing fairly well. Those that don't have education, or are young — meaning they are just entering the labor force — are facing a lot of job related challenges."
But Mohatarem sees more people moving into the upper middle class, leaving a strong pool of individuals who can afford a more expensive vehicle.
And, when it comes to younger buyers, Mohatarem sees them priced out of the market now, but sees that as a temporary situation caused by high student loan debt, and poor entry-level job prospects.
"There may be something to some young people may not be as interested in buying a car," he says. "But, it's really the economics that's driving what's been seen, not a change in preferences."
Analysts say it's hard to tell what impact we will see from General Motors decision to lower prices on the Chevy Volt by $5000. That follows similar moves by Nissan and Ford.
But, electric vehicles remain a small part of the market, and aren't expected to reach one percent until 2020.
But Mike Omotoso, who leads the powertrain forecasting term at LMC Automotive, says that's still a steady growth.
"We think electric vehicles will continue to grow this time around, because the government has put a lot of money behind the EV market in terms of providing loans for electric vehicle production, battery production an infrastructure."
Hybrid sales, Omotoso says, should double between now and 2020, from 3.5 percent of the market to more than 7 percent.
"Companies like Toyota and Ford, that have been building hybrids for ten to twelve years will see the costs continue to drop. Therefore the price premium charged to consumers will drop as well, making them more affordable."
Despite stronger car sales, vehicle on the road continue age. Polk now puts the average age of a vehicle at 11.4 years, and says that could continue to fuel strong pent up demand.
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