By on December 3, 2010

In the beginning of the new millennium, U.S. new auto sales topped 17 million a few times as Americans used the assumed equity in their houses to stuff their three car garages with more cars than there were driver’s licenses in the nation.  In 2000, a total of 17,349,700 new cars changed hands. A year later, 17,121,900 units.  It deteriorated from there. In 2007, 16,089,300 cars were sold.  And we know what happened thereafter.

If we buy and sell 11.5 million new cars this year, it will be called a recovery.  For 2011, J.D.Power sees maybe 12.8 million, if it all works out. They had seen a bit more before, but grew cautious lately.  Now, a prophet appeared that predicts the miracle everybody prays for, a return to former (albeit fleeting) glory:

Michael Robinet, director of global production forecasts for IHS Automotive, said that U.S. new car sales could top 17 million by 2015. “That would be a huge reversal from the historically low sales levels that brought the industry to its knees during the recent recession,” even Detroit’s hometown paper, the Freep, has to concede.

At a presentation made in front of the rapt audience of the Automotive Press Association in Detroit, Robinet counted down the usual number of reasons: Pent-up demand, a growing U.S. population and aging baby boomers with discretionary income.

Robinet agrees with J.D Power and expects sales of 12.8 million or more next year. Then his charts jump to 16 million in 2013 before reaching 17 million in 2015. Of course, he keeps a little hedge. High gas prices over an extended period of time could suppress vehicle sales, Robinet revealed. Who would have thought.

There is just one fly in the ointment. Prophecies by IHS don’t have a stellar track record. Remember a year ago, when a respected research company had announced in November 2009 that Volkswagen had overtaken Toyota in worldwide sales and would end 2009 as the world’s largest automaker? The announcement had emanated from IHS. It made headlines the world over. It was total bunk.

Toyota ended that year as #1, GM was #2, and Volkswagen #3. IHS had made a total mess of the numbers, had forgotten to count Daihatsu, Hino, Audi and sundry others, prematurely put Porsche into VW’s 2009 numbers, and overlooked one simple fact. According to their (wrong) calculations, Volkswagen had sold more than 4.4 million cars by November 2009, “beating Toyota by more than 400,000 vehicles.” It didn’t dawn on them that you can’t possibly be the world’s largest if you had only sold 4.4 million by November. Toyota sold 7.2 million that year, GM 6.5 million, and Volkswagen 6 million.

As much as we wish the glory days to return: Beware of false prophets.

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13 Comments on “U.S. Back To Its 17 Million Glory – In 5 Years...”

  • avatar
    healthy skeptic

    I’m not sure if I understand what the point is with these stories about how China selling is 17-18 miliions cars, and the U.S failing to do so.
    The math seems very simple to me: China has about 1.3 billion people. The U.S. has about 300 million. 1.3 billion / 300 million = over 4 times as many people. Very likely, the pass in car volume is permanent.  It’s not like there’s a scandal here, or the U.S. screwed up or something. They simply have many more customers. India will probably follow suit in the not-too-distant future.
    I think a far bigger story would be if China were *failing* to pass the U.S.

    • 0 avatar

      Well, it seems to be a matter of national pride …
      More importantly, new car sales are a closely tracked number. Just like non-farm payroll and housing starts, they act as an indicator of the health of the economy.
      As for population numbers, you are right. But it’s not as easy as that. If it would be a function of population alone, then Pakistan, Nigeria, Bangladesh would be huge car markets. Even the Indian number (1.43 million) is much lower than that of the UK (2 million).
      You need people with money. There is an old rule of thumb in the business that never fails: Once the nominal per capita GDP of a country passes $1000, car sales take off. With $3,744 in 2009, China is well along. India ($1,134) has just crossed the threshold, and you see it in their auto sales that suddenly wake up.
      If you have people who have money, car sales will increase until the market reaches saturation. The U.S. market is considered way over-saturated compared to the rest of the world.

  • avatar

    It’s not like large corporations to worry about the longer term, but I see more problems there than in the short run.  Many of the people who dipped into home equity early in this century to finance depreciating assets like vehicles, got burned. Let’s say a lot of them were thirty-ish then and are now a little more mature to boot. These people are experiencing the constraints of personal finance today like never in their lives.  Their children are witnessing it. There could easily be 30-40 years of conservative consumers who remember that shiny SUV or convertible that almost put them under back in the 2008 or so. They will not be buying new cars every three years.

    • 0 avatar

      The frugalista factor will definitely be in play in this household. After seeing what happened to other family members and neighbors during this recession, it makes sense to be conservative with regards to borrowing.  We’ll have to wait and see if this is a wide spread trend.

    • 0 avatar

      Personally, I hope that this trend holds and we do see a return to some fiscal common sense and frugality.

      Realistically, I’m not so sure we’re there yet.  While at first it appeared that the numbers supported the claim that consumers are holding back, it appears that they’re not holding back and becoming more prudent out of personal choice but out of force.  With equity loans disappearing, cheap credit (for all except the banks) disappearing and jobs disappearing, people had no choice but to curtail spending.

      In recent months, however, data has borne out more that the decline in consumer credit was not because consumers have been deleveraging but because they couldn’t get their grubby little hands on more cash.  In other words, it is very likely that once the spigot of easy credit opens up again the masses will return to the trough to feed. Sad.
      I’m willing to be proven wrong on this, but the data is just too mixed at the moment and obscured by massive write-downs by the banks which are masking the true nature of deleveraging at the moment.

      My bigger concern is overall wage deflation and the increasing costs to fund basic infrastructure for our communities (think water, sewer, streets, police, fire, EMS, schools, libraries) and the declining tax base able and willing to pay these costs.  My gut tells me that these expenses are goign to start rapidly eating into the disposable income of the middle class in America because as the era of cheap credit disappears fro consumers, so it does for government as well.  The choice then is to either allow that infrastructure to decline or to increase taxes to support it.  Bad choices all around.
      Happy Friday, everyone! ;-)

  • avatar

    Really it is pathetic that the Chinese AREN’T buying more than 40M cars per year.

    Even the most diehard Prussian-indoctrinated nation-statist could not view this as “National Pride” thing.

    Are Americans really that weak that a popped fiat-money-induced economic bubble will make them cower for decades like in the 1930s? Are the Americans Japanese now?

    • 0 avatar

      Give them a few years.
      According to conservative projections (assuming only 12 percent growth after an average of 24 percent in each of the past ten years) China will be buying  40 million cars by 2017 or 2018. Even then, they will only have a car density of 217 per thousand, which is lower than all of Russia last year (225 per thousand).

  • avatar

    17 million SAAR = credit bubble. That level wasn’t sustainable. Will the US go there again? Probably. By 2015? Doesn’t seem likely.

  • avatar

    and in the case of GM and Delphi…false profits

  • avatar
    Amendment X

    Dear TTAC: I know you are an underdog website that needs to pay the bills, but I just wanted to say that those stupid “Vibrant” video ads that pop up when you accidentally hover your mouse over certain words are EXTREMELY annoying.
    Whining over.

  • avatar

    The US car fleet is, what, 200 million vehicles?  With a lifespan of 14 years, 14 million cars must be sold per year to replace those vehicles that wear out (roughly).  However, with harder credit and lower wages and a more conservative consumer, many second, third, or fourth family cars are going to be let go.  Families with teenagers will have one car they share, rather than one for each.  Families with two cars, where one person commutes by public transit, may forego replacing a second car when it wears out.  I think the US fleet is going to shrink, and thus the sales per year to replace worn out members of the fleet will shrink.  I bet we’ll see about 13 million per year sales for our population size, and other than changes in demographics and population size, it won’t budge beyond there.

  • avatar

    I long for the Cold War days when USA kitchens were paraded before Khrushchev as being far superior to cold, minute, sterile USSR kitchens and that USA kitchens, and the equipment within, were the envy of the world.
    Of course, to allow those USA kitchens to properly function required an extensive properly functioning infrastructure of various inputs such as electricity, natural gas, potable water, waste riddance, etc.
    If the ChiComs ever commence the braggadocio regarding their conveyance output we merely need to compare and contrast the quality of dumpster dining our underclass has at hand to what is assuredly the inferior vittle quality and quantity available to China’s outcasts, those unable or incapable of obtaining required calories for sundry reasons.
    I omit any suggestion of comparing China’s conveyance housing/storage capabilities with that of the USA since I fear with time and the continued economic woes accompanying what I believe will be a permanent class war within the USA that a plethora of USA garages will be converted into living units as so often seen in areas of California with very high numbers of undocumented future citizens.
    Heck, during the economic downturn of the early 1980s I hanged the proverbial hat in a portion of a typical tract home garage and used the facilities inside the house as needed, departing the innards of the abode when finished.

  • avatar
    Robert Schwartz

    Unemployment went up today to 9.8%. It has to get back to the 5% range if you want to see car sales pick up. Tell me when that is going to happen.

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