NADA Chief Economist Paul Taylor: "giddy" about 2012
NADA’s Chief Economist Paul Taylor told reporters at the NADA Convention and Expo that things look bright for 2012 car sales in the U.S. Taylor said he predicts a “rebuilding year” for the auto industry resulting in 13.495 million new cars and light trucks purchased or leased in 2012.
If this figure is reached, it will mark the third consecutive year of rising new vehicle sales. This is also up sharply from the 10.4 million number in 2009 when the industry was battered by spiraling economic conditions in the U.S.
After his presentation Taylor’s colleague Jonathan Banks, Executive Automotive Analyst with NADA Used Car Guide, who presented an optimistic overview of the used car market.
“We are both basically giddy,” Taylor joked with reporters during his comments at the end of the press conference, and added that the optimism is based on sound fundamentals.
Despite the optimism, Taylor cautioned not to expect the industry return to its highs of 16 to 17 million seen during 2000-2007. “Those figures were not obtained during normal sales conditions,” he said. “Recent sales are what we’d expect from a normal economy coming back from recession.”
Taylor credits factors such as better credit conditions, more generous incentives and low interest rates for the boost in sales.
2011 was also weakened by supply shortages as a result of the natural disasters in Japan and Thailand, so barring further disasters, 2012 should see fewer inventory problems. There were also other “unexpected shocks to the the system” such as gas price hikes, the European debt crises and political struggles in the U.S. that cooled consumer confidence.
Taylor says there is also pent-up consumer demand sparking an increase in purchases. With the average age of a vehicle on U.S. roads at 11.1 years, many consumers can no longer delay purchasing a new vehicle.
In a news release, Taylor outlined the top five reasons for his upbeat forecast.
* Pent-up consumer demand: “Consumers want new cars and light trucks. We can see that in strong auto show attendance and sales in January.”
* Return to stabilized credit: “Interest rates on new car loans will remain historically low in 2012 and 2013, due in part to policy decisions by the Federal Reserve Board to keep rates low and the U.S. economy growing.”
* An influx of options: “The interest in new cars also reflects the lack of used cars with low mileage. During the recession, 5 million cars didn’t come to the marketplace as trade-ins.”
* The wild card — gasoline prices: “Gasoline prices could hurt or help sales in 2012.” This year analysts predict another boost in prices that could bring gasoline prices to $4.13 a gallon.”
* Home prices: “Although real estate prices and values are still falling in some states, they appear to be stabilizing overall. That will continue to boost consumer confidence, which will translate into increased interest in new car and light truck sales.”
