CS FirstBoston on U.S. New Car Market: Uh-Oh
Our regular CS FirstBoston mole has sent us an update on their analysis of the U.S. new car market. Bottom line: it’s going to get a lot worse before it gets even worserer. So, he asked rhetorically, is this a good time for the taxpayer to “loan” money to Chrysler and GM? Only if you define “good” as “worst possible.” Sorry, was I talking about ROI? My bad. In terms of bailing out automakers without a hope in hell of turning a profit for years to come, these are the good old days.
• We are slashing our forecast for 2009 light vehicle sales to 10.4 million units, down from 12.0 million units previously. Details of the changes in the factors that plug into our demand model and account for the revision are as follows:
• Real income growth. Our forecast for 2009 real disposable personal income growth falls to 0.8%, from 2.5%, partly reflecting higher unemployment and partly as a result of a disappointing economic and tax stimulus package
• Home price growth. Our home price growth forecast slips to a decline of 7.0%, from our previous forecast of down 5.0%. The FHFA House Price Index posted a decline of 4.5% in 4Q08, and recent NAR data suggests declines are accelerating in Q1.
• The outlook for 2009 production is similarly impaired. We now expect North American output of 9.2 million units in 2009, down from our previous view of 10.6 million. We will introduce new quarterly production estimates in mid-April, as part of our Q1 earnings preview report.
• We are also issuing a revised longer term U.S. sales forecast calling for 12.5 million units in 2010 (down from prior 13.3 million) and 13.8 million units in 2010 (down from prior view of 14.1 million).
• Our new sales forecasts exclude any would-be effect from a possible scrappage program that provides government incentives for consumers to replace older vehicles with new, more fuel efficient models. The current proposal in Congress is likely to be viewed as expensive and protectionist, in our view, and faces formidable hurdles to becoming law.
• We also believe that the TALF program will not result in a meaningful increase in demand, as the deterioration in employment and consumer confidence may trump an increase in credit availability.
• Our Consumer Watch Scorecard was mixed in the latest update, with four factors improving and four deteriorating. The overall implications for light vehicle demand are still severely negative, with all eight Scorecard factors in the Minus column.
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- 3-On-The-Tree Lou_BCone of many cars I sold when I got commissioned into the army. 1964 Dodge D100 with slant six and 3 on the tree, 1973 Plymouth Duster with slant six, 1974 dodge dart custom with a 318. 1990 Bronco 5.0 which was our snowboard rig for Wa state and Whistler/Blackcomb BC. Now :my trail rigs are a 1985 Toyota FJ60 Land cruiser and 86 Suzuki Samurai.
- RHD They are going to crash and burn like Country Garden and Evergrande (the Chinese property behemoths) if they don't fix their problems post-haste.
- Golden2husky The biggest hurdle for us would be the lack of a good charging network for road tripping as we are at the point in our lives that we will be traveling quite a bit. I'd rather pay more for longer range so the cheaper models would probably not make the cut. Improve the charging infrastructure and I'm certainly going to give one a try. This is more important that a lowish entry price IMHO.
- Add Lightness I have nothing against paying more to get quality (think Toyota vs Chryco) but hate all the silly, non-mandated 'stuff' that automakers load onto cars based on what non-gearhead focus groups tell them they need to have in a car. I blame focus groups for automatic everything and double drivetrains (AWD) that really never gets used 98% of the time. The other 2% of the time, one goes looking for a place to need it to rationanalize the purchase.
- Ger65691276 I would never buy an electric car never in my lifetime I will gas is my way of going electric is not green email
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CSFB neglected to mention the 800 pound gorilla in the room, that being our federal government’s insatiable predilection to fix the unbroken. Leave the markets alone and things will eventually get better. But saddle the market with insane dicta from the EPA about trace gasses and fanciful notions of 100 mpg cars from the children in Congress, and all bets on a recovery are off.