J.D. Power Raises 2010 Sales Projections A Tiny Notch, May Likely Ho-Hum
After exhaustive study of the U.S. economy and buying patters , J.D. Power raised their U.S. sales outlook. From previously forecasted 11.7m units to 11.8m units. Rental car lots are seen to absorb a good chunk of the total. True retail sales are projected to be 9.7m units when the year is over. “Much of this is due to the increased fleet mix,” says Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. In May, J.D. Power is “looking for fleet sales to account for 24 percent of total sales.”
Power expects May new-vehicle retail sales to come in at a seasonally adjusted annualized rate (SAAR) of 9.2m units, down from April’s SAAR of 9.6m units. Fleet sales to the rescue: They are expected to push the total SAAR to 11.3m units, a tick above April’s selling rate of 11.2m units. Total light-vehicle sales for May are projected to rise 17 percent, compared to the dismal May a year ago. Fleet volume is forecasted to be up a whopping 52 percent from May 2009. All eyes on Memorial Day to make May sales more memoriable.
North American production for 2010 is forecasted to be at 11.2m units for the year, up 32 percent from 2009. NA capacity utilization is seen at 64 percent in 2010, up from 47 percent in 2009. In the industry, any capacity utilization below 80 percent is seen as a sign of losing money.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
More by Bertel Schmitt
Comments
Join the conversation
At the risk of sounding alarmist, there are a growing number of signs that the rebound we've had the last twelve months was little more than stimulus driven sales pulling demand forward and restocking inventories that fell abnormally low. Data on home sale contracts, permits and mortgage requests from late last week show an alarming decline after the home buyer credit's expiration April 30. I have several friends and clients in the mortgage and real estate industries who told me last night that business literally died as of May 1. That's very worrying. Absent inventory restocking and government stimulus, the economy is still on significant life support. I give us a good 80% chance of a second leg down starting this summer.
Fleet sales are not always a bad thing. There are different segments of the Fleet business. Commerical and Governement buy more like retail consumers -- buy the best products out there, and keep them for an extended period of time to get the most value out of them. The brand crippling sales were when OEs dumped product onto the rental car market for cheap so they could keep the plants running full speed. I don't see that happening today -- there don't any deals to flip cars in a few months, and rental cars are a mix of many OEs. Ford and GM have cut back their production capacity so much, that their dealers are complaining of a lack of inventory. So the days of them flooding the market with rental queens should be over.
Based on the mileage I see on used vehicles at the local Hertz resale lot it seems that the big rental companies made a decision last year to hold on to their vehicles longer than they used to. If so, that would have temporarily driven down their demand for replacement new vehicles. Perhaps the big rental fleets are back in the market now after having adapted to the new, longer use periods. Also, Toyotas have long had a big presence in the rental fleets, and Toyotas generally have good resale values in their class. The widely held view that rental sales depress new car prices and used car resale values isn't completely true.
Can someone answer for me.. What point does J.D Power have in making projections for the car market. We've already figured out... its slowly returning, and at a snails pace.