Industry shift into low sales volume could be permanent

Donna Harris covers retail issues for Automotive News
If we're to believe Thomas King of J.D. Power and Associates, who spoke last week in Fort Worth, Texas, at the National Automotive Finance Association's annual conference, new light-vehicle sales could be stuck in low gear for good.

King was asked by his audience what kind of new normal we can expect as an annual sales rate. He told them he thinks equilibrium for new retail sales is about 12 million. In the early years of this century, the sales rate was artificially inflated by aggressive incentives, he explained.

On the immediate horizon, King forecasts 9.7 million new retail sales this year, 11.3 million in 2011 and 12.5 million in 2012. If you add fleet sales to the total two years from now, that'll come to 15 million light-vehicle sales.

The key to profitability these days is lower volumes, lower incentives and higher transaction prices, said King.

Dreaming of 16 million light-vehicle sales? Don't even think about it.