By on January 8, 2011

James W. Paulsen, chief investment strategist at Wells Capital Management, sees U.S. auto sales bouncing “back to normal” by year’s end. “Normal” being  “a rate of 15 million to 16 million vehicles.” Bloomberg painted a nice Chart of the Day, which seems to support that gutsy theory.

Paulsen and Bloomberg charted the recoveries after the 1981-1982 and 1990- 1991 recessions, and overlaid them with the current sales rebound. If that rebound behaves like the previous rebounds, the chart says anywhere between 14 and 15 million by year’s end, but let’s not quibble.

Paulsen and Bloomberg are pretty much alone with that forecast. Despite a good December, J.D. Power kept its 2011 forecast at 12.8 million units. Edmunds reports a “somber atmosphere” from  the Detroit Auto Show, and “is forecasting 12.9 million for 2011.”

But then, Paulsen isn’t in the car business, he is flogging stocks. Especially car stocks that “may again have a good year”, Paulsen writes. Let’s hope so.

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16 Comments on “Happy Days Are Here Again? Analyst Sees 15 – 16 Million Cars This Year...”


  • avatar
    johngalt

    Just so I’ve got this straight.  With unemployment at 9.4% and underemployment hovering around 17% and Ben Bernacke testifying less than 48 hours ago that the jobs picture won’t recover for another 4 to 5 years, this dynamic duo of prognostication is predicting that auto sales this year will return to the levels of the days of 4% unemployment and easy credit.
    Bertel, a better pick for your You Tube video might have been Dream, Dream, Dream by the Everly Brothers.
     

    • 0 avatar
      gslippy

      You’ve nailed it.  This fake recovery won’t be real until people are working again, and can afford houses and cars.

    • 0 avatar
      John Horner

      The way I see that problem is that the US labor market continues to bi-bifurcate. There are certain people with certain skills sets (and connections!) who are in high demand and are making big bucks. On the other hand, there is a growing segment of the population which finds it very, very hard to get a job because they don’t have the skill set and/or connections which get a person those high paying jobs.
      Consequently, the job picture for many high earners is very, very good. Look at the $8m/season deal Harbaugh just got to take his first ever NFL head coach job. Obviously his isn’t a typical situation, but it is emblematic of the fact that there are a goodly number of people who are making more money than ever.
      This past Christmas luxury goods sales skyrocketed. Saks’ sales, for example, were up almost 12% Dec ’10 vs Dec ’09.
      So, the economy is doing very well for those who are doing very well. But for those who have been left behind, things are very tough. 15 million units requires that less than 5% of the US’ population buys a new car or truck. Not everyone has to be doing well for those kinds of numbers to happen.
       

  • avatar
    Educator(of teachers)Dan

    How bout Beyonce – Sweet Dreams (or a Beautiful Nightmare) [turn the lights on!]
     
    I think Mr. Paulsen needs his meds adjusted.  When you need to release your tension smoke a good cigar or frolic with the sexual partner of your choice, don’t do do drugs kids.

  • avatar
    Steven Lang

    Dear Mr. Paulsen,
    I have yet to take any medications for my even keel nature. However if you can share with me your current dosage, I would gladly reconsider my no-alcohol/tobacco/refined sugars/fast food/magic pills/uncooked meats or refined motor oils diet.
    Kindest regards,
     

  • avatar
    steve from virginia

     
    Let’s destroy the spaceship a little faster, let’s ruin the world’s economies faster, let’s have more food- related violence worldwide so that manufacturers can spew out a few more boxes.

    This is good news for whom? Car dealers? Probably not.

    “Cars mean jobs, right?”

    How is that working out? An ‘official’ 16% unemployment rate (leaving out those who have stopped looking) and a record 43 million Americans on food stamps would suggest that diverting resources toward carz and away from other creative endeavors has been a big mistake.

    Fortunately, the finance rapists who run the auto business will only sell 12 million or so new carz this year. That about 11.9 million too many: big SUVs and Giant Pickup Trucks btw.

    Fortunately deux, the decline in fuel availability at a price will have the last word and soon. Energy shortages are expanding in speculators’ darling China.

    Shortages that are the consequence of industry being unable to gain enough returns on its output to afford higher- priced inputs will be permanent.

    What matters is fuel priced by output. Even if fuel is dirt cheap, people unable to earn money cannot afford it. The price squeeze between fuel input costs and returns on output has been the character of the world economic decline beginning in 2004. As nominal fuel prices increase the price or margin squeeze becomes more destructive and self- amplifying. More jobs are lost in an unstoppable vicious cycle.

    As the cheap- to- extract fuels disappear into the atmosphere what is left is unprofitable to make use of by a commercial infrastructure designed and built around the cheap stuff. This unprofitability point is where the world is, right this second.

    Car lots across America are stuffed with carz that cannot be sold now. Parking lots of stores selling non- auto goods across the streets from the car lots are empty. What this means in real terms is the makers are cannibalizing customers from other businesses which in turn starves the dealers of customers. The makers are in competition — a Darwinian struggle to the death — with their own dealers.

    At some point when enough businesses fail, the ‘shadow inventory’ of excess carz will be dumped on the market. This will be accompanied by some kind of government ‘program’ giveaway to makers: ‘Cash for Klunkers Redux’.

    Automakers bankrupt their putative customers’ grandchildren by way of the tax man. Good business plan. May the makers all go to hell.

  • avatar
    MikeAR

    He’s joking, right? Fuel is more expensive, cars are more expensive and the percentage of people in the labor force is shrinking fast. Just who is going to buy these cars?

  • avatar
    dwford

    I don’t see where this prediction is coming from. More and more potential customers are getting priced out of the market by higher used car prices, higher new car prices, higher operating costs – gas, insurance, parking, and by tighter credit. Couple that with a new generation that is starting to prefer public transporation and car sharing vs ownership, and the market will be stagnant for a while.

    On the flip side, even at lower volumes, the maufacturers will be able to be profitable through lower incentives, high prices, and by keeping days supply under control.

    2011 will be interesting as sharp new competitors vie for sales with old standbys sold at a steep discount. New Hyundai Elantra for MSRP or deep discount Honda Civic – hmmm..

  • avatar
    Patrickj

    Even before the recession, vehicle lifetime was 16 years for cars, 18 1/2 for light trucks (state of California), giving a lifespan of about 17 years overall.  The U.S. DOT reports 13 years, which seems a little short.
    Using 16 years and a national vehicle fleet of 246 million cars implies an eventual rise to 15 million sales a year unless the number of vehicles in the national fleet falls.   A lifetime rise to 18 years would decrease replacement sales to roughly 13 1/2 million.   Given that the early to mid 90s vehicles that would be scrapping candidates today have been very reliable, longer lifespans are more likely than shorter.
    Though with an aging population trending away from rust-belt states, and the lower interest of young people in driving and owning cars, we could be a long time getting to 15 million.   Used car exports to Mexico and Central America could be a wild card, though.

  • avatar
    Educator(of teachers)Dan

    Even before the recession, vehicle lifetime was 16 years for cars, 18 1/2 for light trucks (state of California), giving a lifespan of about 17 years overall.  The U.S. DOT reports 13 years, which seems a little short.
     
    Alright!  I’ve got another 12.5 years to enjoy my F150!

  • avatar
    Moparman426W

    Here in the rust belt the average lifespan of a vehicle that is driven year around is between 10-12 years.  You do see older vehicles, but those are the ones that are not driven during the winter.

  • avatar
    WRohrl

    People don’t need to be able to afford a new car to be given the opportunity to drive one home.  I saw it firsthand the other day.  Her’s my situation:
    My wife and I left our jobs by choice at the end of this summer and moved from CA to CO.  We bought a second house before we left and made sure we had enough savings to last for quite a while.  The original house went on the market when we left.
    We decided we needed a new small SUV and decided to take advantage of a good national lease deal that was being offered thinking we’d rather have a small payment for a few years that be out a chunk of cash by buying outright. (Yes, leasing in general does not make sense, that’s not the point here). 
    We went to the dealer, picked out the car, filled out the credit form, stated that we moved a few months ago, the old house has sold (But had not closed yet so the payments it still on the books and the cash is not in the account yet, so effectively we had two mortgages if anyone checked), I stated that I opened my own business and jotted down a monthly income figure.  I did not give a bank account number to check.  Nobody asked for an income statement, bank statement, or anything.  The only thing that may have been checked is my credit score which is just under 800 (excellent). 
    So I believe that if someone wants a new car, they can get one.  Being able to afford it is completely unrelated. I am not naive enough to believe tht the general public always does things that make financial sense, it’s all about instant gratification.  It is funny, I was stressing a little bit when I walked into the dealership, but was amazed how easy it was when I drove out.

  • avatar
    daga

    Can you list his stock recommendations so that I can do the reverse?
    I thought analysts were trying to get it right, not be “controversial”
    Wasn’t the 81 recovery after a double dip from inflation?  That’s not like today
    Wasn’t the 91 recovery coinciding with the start of ABS driven loan issuance?  That’s not like today either.
    If it tracks the 1932 recovery it will be 21MM!!!  Oh, wait.  Different conditions then too.
    Jeez, maybe each one is different.
     

    • 0 avatar
      thornmark

      The “Great Depression” was much shorter and milder in Europe than the US.  Great Britain did the opposite of FDR and they turned around in a matter of years.  FDR greatly expanded government, taxes and regulation and that kept the US economy mired.
      See Depression of 1920:
      http://www.thefreemanonline.org/featured/the-depression-youve-never-heard-of-1920-1921/
      http://www.cato.org/pub_display.php?pub_id=9880

  • avatar
    bufguy

    The “Great Depression” was much shorter and milder in Europe than the US.  Great Britain did the opposite of FDR and they turned around in a matter of years.  FDR greatly expanded government, taxes and regulation and that kept the US economy mired.
    See Depression of 1920:
    http://www.thefreemanonline.org/featured/the-depression-youve-never-heard-of-1920-1921/
    http://www.cato.org/pub_display.php?pub_id=9880

    You’re drinking the Rebublican Kool-aid thornmark….quoting the right wing spin machine..the Cato Institute.
    A major cause of the great depression was people buying on margin…overextending themseves…sound familiar?
    Hoover’s solutions weren’t working. FDR was making a major dent in unemployment and growth when in 1936, bowing to Republican pressure the gov’t actually cut way back because of concern with the deficit…this created a double dip recession within the depression.
    Yes WWII did pull us out by conscripting millions and creating a huge wartime economy.
    I wouldn’t put much credence in the Cato Institute…Read History


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