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New forecast is more optimistic on auto sales

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New forecast is more optimistic on auto sales

Pent-up demand could drive purchases above prerecession peak

BY GREG GARDNER

FREE PRESS BUSINESS WRITER

Automakers will sell about 11.7 million vehicles in the U.S. this year, but that will rise sharply to 14.4 million next year and 16.1 million in 2012, according to a new forecast by global consultancy A.T. Kearney that the firm's Detroit partner outlined Tuesday.

This outlook is slightly more optimistic than previous forecasts from other experts and industry leaders, especially for 2012 through 2015, when Kearney's Dan Cheng sees U.S. consumers buying at least 17.5 million vehicles, exceeding the 2000 prerecession peak of 17.3 million.

"The age of the average vehicle on the road is now about 10 years," which is a post-World War II high, Cheng said. "We don't see a major trend of reurbanization, or the government putting a floor on gas prices through a substantially higher gas tax."

The other factor that will propel sales is what economists call pent-up demand. Consumers delayed or avoided buying nearly 20 million vehicles due to unemployment, lower incomes and economic uncertainty over the past year or so.

Eventually, many of those consumers will return to the new vehicle market. Still, Cheng cautioned that even in a strong economic recovery not every consumer who delayed purchasing a new vehicle will rush out to buy one in the next few years.

Lenders have set stricter credit standards, and many consumers will not recapture their lost income even as they land new jobs. But nearly half, or about 9 million additional sales, will be driven by pent-up demand in the next few years, Kearney estimates.

A variety of events could dampen Kearney's rosy outlook, Cheng warned. Those include new terror threats, a collapse of the euro if countries other than Greece require bailouts from the European Union, or geological shocks such as the Iceland volcano's disruption of the transportation of parts across major regions of the world.

However, the most likely wild card, he predicted, will be volatile gas prices.

link:

http://www.freep.com/article/20100519/BUSINESS01/5190328/1331/New-forecast-is-more-optimistic-on-auto-sales

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