Analyst sees housing, credit improvements releasing pent-up demand

DETROIT -- U.S. light-vehicle sales will rise to 17 million units by 2015, from 2012's 14.9 million, Morgan Stanley Managing Director Adam Jonas told the Automotive News World Congress. Pent-up demand will fuel that rise, he said.

The average car on the road in the United States is 11 years old, representing a lot of pent-up demand, he said during a presentation here Tuesday, joking that nearly half the cars on the road today have tape decks.

But there is a very big difference between having pent-up demand and triggering the release of that demand, he said.

Jonas said the level of pent-up demand, which grew during the recession, reflects the interplay between the auto industry with credit, which now has become more available, and with the housing market, which also has been improving.

'Smashing' sales

The recovery of the housing market is fundamentally good for auto stocks, he said.

"It's little wonder that U.S. auto sales are smashing through the five-year highs just when housing is coming out of hibernation," he said.

Last week, Morgan Stanley raised its 2013 U.S. light-vehicle sales forecast to 16 million units from 15.5 million previously.

Housing and auto markets in general have a strong correlation, while housing and the pickup segment have an even stronger correlation, Morgan Stanley data shows.

The housing market recovery could cause a rebound in U.S. pickup sales which would be "higher than we're even physically able to produce at this point," he said. This would be good news for automakers' profitability, he said. But he predicted that their profitability will probably peak in 2013.

'Entering a treadmill'

"We've been on a nice escalator and we think at some point we're going to be entering a treadmill" in terms of automakers' profitability, even if sales volumes continue to rise, Jonas said.

Jonas also predicted the number of cars per household will continue to drop, and that electric vehicles will only play an incremental role in the next five to ten years if gas prices reach $4 or $5 a gallon.