Sales Recovery Survey: False Dawn?

The question of a sales recovery looms large in discussions of GM and Chrysler’s road to viability. In particular, GM has been accused of overestimating demand recovery, as its successive viability plans have consistently revised demand assumptions downwards. But a survey and followup by RL Polk ( full report in PDF) suggests that not only are a significant number of American consumers considering vehicle purchases, but many would buy American to “support the economy.” In all of the surveyed regions at least 50 percent of vehicle owners aged 18-64 said they planned a vehicle purchase in the next two years. Good news for Detroit? Polk’s breathless press release for updated regional data sure makes it sound like it. “In fact, more than a quarter of consumers we talked to as of the end of March plan to buy a new car or truck within the next year, even better news for automakers struggling to move excess inventory from dealer showrooms,” says Polk’s Lonnie Miller. But a closer look at the original survey shows that it’s too early to start counting chickens.

The study shows that 60 percent of consumers oppose the auto bailouts, despite acknowledging that bankruptcies would be “a major blow” to the US economy. But the data also shows Americans taking a pragmatic approach to the alleged crisis. Though predictions about the state of the economy over the next twelve months were all over the place, over half of respondents predict that their family’s financial status would stay the same. Less than 30 percent predicted their situation worsening. Still, 32 percent predicted a vehicle purchase in the next year, while 26 percent were considering a purchase in the next two years. 72 percent would “consider” a domestic vehicle in order to “support the American economy.” Tragically no control was done to show, for example, how many respondents would be willing to take a sharp stick in the eye “to support the American economy.”

Besides, the key metrics in the survey show that the average length of vehicle ownership is increasing, and that as many Americans are considering used vehicles as domestics. Average ownership length for new cars is now 56.3 months, up about six months since 2002 and on a long-term trend upwards. Two thirds of respondents tell Polk that they are “very likely” or “extremely likely” to keep vehicles “longer than they would otherwise,” with another 25 percent responding “somewhat likely.” Worse still for Detroit is the 70 percent reporting being at least “somewhat likely” to consider a used vehicle.

Polk’s picture is clear: the economy is bad so people are holding onto their vehicles longer and considering used cars. The common sense of these conclusions stand in sharp contrast to the “would you buy a Detroit-made car to feed your family” question. Re-parsed through a regional lense the data comes out looking better from Detroit, but the underlying trends clearly point to a persistently weak market for new cars.