Schuster: North American SAAR To Remain Strong Through 2020
Six years removed from the Great Recession, LMC Automotive senior vice president and economist Jeff Schuster believes North American auto sales will remain strong through 2020 despite the remaining effects of the recession.
Automotive News reports Schuster, speaking at the 2014 Management Briefing Seminars in Traverse City, Mich., added that slow or declining growth in global markets — such as those of the BRIC contingent — will mean such growth will be “at a more muted rate” than the overall North American market, thanks in part to leaner manufacturing between automakers and suppliers.
He goes on to say that fleet sales are down from 22 percent to “a more healthy” 18 percent, with factory utilization up to 90 percent, both part of the push toward 17 million SAAR at the end of 2014. Schuster believes the SAAR will continue to improve until 2020, falling somewhere between 16.7 million and 18.3 million units sold that year.
Finally, Schuster says the external factors in where the SAAR will go include older consumers delaying retirement and younger consumers “delaying full entry to adulthood by continuing to live at home and postponing marriage.” Profits may also lag behind sales, and incentives should be watched, he explained.
Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.
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“delaying full entry to adulthood by continuing to live at home and postponing marriage.” Probably the best description of Millennials I've read yet.
I think Schuster is dead on although he doesn't mention that impact of interest rates that will most certainly rise between now and 2020. The observation about fleet sales is also right on. Fleet and rental vehicles are needed in the market but 18% isn't a level where they are being "force fed," which impacts resale values and creates additional negative equity and/or less equity in potential buyers' trade ins, which impacts new vehicle sales. There is still tremendous pent up demand for new vehicles and consumers are gradually rebuilding their credit scores, many of which were maimed as a consequence of the Great Recession. Trade in values might drop somewhat as greater supply of preowned inventory comes online, but we have not seen any kind of a precipitous drop so far as the pent up demand continues to gobble up the larger numbers. There is no financing bubble and the only substantial headwind will be somewhat increased interest rates. OEMs have already priced in some room for subventions but it is quite possible we could see a doubling of interest rates in the next few years. As long as the increase happens gradually, it could be a good thing in the big picture. Current rates are not realistic or market driven and to continue too long carries a lot of risk. Retirees and savers would appreciate a higher interest rate return. Higher floor plan rates make dealers sell more aggressively. Its going to be a good next few years in the auto industry. Dealers will do well because the volume is shared with thousands fewer dealers than before the Great Recession and auto industry rescue.
If there's one thing I've learned in life, it's that these financial tea-leaf forecasters are never correct. Not once. Never. They can't get the next six months correct, let alone six years. One thing we can all be sure of: whatever these twits or the ones forecasting CAFE will ruin the party, a few posts ago, will be completely wrong. Because they're never right.
As long as the banks will keep writing loans to anyone with a pulse, sales will be amazing.