Sales Recovery Survey: False Dawn?

Edward Niedermeyer
by Edward Niedermeyer
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.

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  • Kristjan Ambroz Kristjan Ambroz on Apr 30, 2009

    After taking a brief look at the Polk study, the only conclusion is that it's garbage. They conveniently forget to state any relevant sample characteristics, which would allow you to judge its quality, and from my experience of dealing with market research, 713 is not nearly enough for any sort of reliable conclusions. Add to that the fact that questions are generally interpreted as answered by most market research agencies, without checks for consistency. It's not necessarily malicious but the problem is that the majority of the people doing these interpretations really do not have the necessary statistical grounding, intellectual curiosity and honesty, or in most cases money (for a properly designed, sufficient sample size study) to produce anything meaningful. In all market research I've seen or been involved in, intention is a very weak predictor and usually reflects a post purchase rationalisation bias. People are generally consistent, so as a theoretical example, someone who states they have a preference for Ford will most likely have a high intention of their next purchased vehicle being a Ford. Wheone looks at actual purchase behaviour for that individual, brand loyalty rates tend to be no higher than for people, who express no preference for a brand and a much lower intention of purchasing the same brand.

  • Kevin Kevin on Apr 30, 2009
    72 percent would “consider” a domestic vehicle in order to “support the American economy.” That's a bogus leading question in any case. NO ONE is going to lay out $20 - $40 thousand to "support the economy" despite anything they say while being polled (which if I recall from junior high school, is a form of torture). A more valid question is "Will buy an American car?" period. But the only thing that matters is revealed preference ... checkbooks don't lie.

  • Johnny ringo It's an interesting vehicle, I'd like to see VW offer the two row Buzz in the states also.
  • Chuck Norton And guys are having wide spread issues with the 10 speed transmission with the HP numbers out of the factory......
  • Zerofoo "Hyundais just got better and better during the 1990s, though, and memories of those shoddy Excels faded."Never. A friend had an early 90s Hyundai Excel as his college beater. One day he decided that the last tank of gas he bought was worth more than the car. He drove it to empty and then he and his fraternity brothers pushed it into the woods and left it there.
  • Kwik_Shift There are no new Renegades for sale within my geographic circle of up to 85 kms. Looks like the artificial shortage game. They bring one in, 10 buyers line up for it, $10,000 over MSRP. Yeah. Like with a lot of new cars.
  • Ribbedroof In Oklahoma, no less!