DETROIT -- Want to know how many new vehicles will be sold this year? Take a look at the scrap heap.
Auto sales will be stronger than many expect this year and in 2015 because pent-up demand isn't used up; it's just starting, says Itay Michaeli, head of auto research for Citi Investment Research & Analysis, speaking at the Automotive News World Congress.
He expects U.S. light-vehicle sales of 16.4 million this year, at the top end of the range of most forecasters. But his 2015 outlook for 17 million sales is higher than the pack's.
Michaeli reasons that it isn't the age of vehicles on the road that triggers new-vehicle demand but the age at which they are taken out of service.
And what he calls the scrapping cycle is about to shift into high gear.
The average age of the 241 million U.S. vehicles in operation is 11-plus years; that is, those built in late 2002. That time point is in the middle of a nine-year plateau of 16 million or more U.S. auto sales between 1999 and 2007, but after the 2000 peak of 17.4 million. That suggests pent-up demand is starting to wane.
But Michaeli noted that 74 percent of all vehicles removed from operation are between 11 and 23 years old, and the peak scrapping age is for vehicles 13 to 17 years old. This year, that range would mean 1997 to 2001 models, just at the beginning of that wave of high sales years.
"We should care less about the age of the fleet and more about the age of what's being scrapped," he said.
He acknowledged that not all scrapped vehicles are replaced. And current trends of Americans driving fewer miles a year and buying fewer vehicles per household will blunt the scrapping cycle's effect.
But higher scrapping rates the next several years should positively affect new-vehicle sales the rest of the decade, he said.
Michaeli often has an unconventional take on the auto industry, driven by Citi's proprietary data. Each year, Citi polls U.S. drivers.
"It's pretty simple," Michaeli said. "We ask how many vehicles in your household, how many do you expect to have in two years, and why."
Michaeli is not the only forecaster breaking from the pack. Analyst Alec Gutierrez of Kelley Blue Book expects natural demand for 16.3 million light-vehicle sales in 2014. But he warns that sales could jump to an artificial and unsustainable high of up to 16.8 million units if automakers lose their discipline in an effort to grab market share.
U.S. auto sales climbed 49 percent to 15.6 million units from 2009 to 2013; some forecasters say that slower growth this year could trigger an incentive-driven price war.
Gutierrez considers a price shootout unlikely. Michaeli said it's much more likely that either "the market normalizes" or Japanese automakers push to add vehicle content because of a weaker yen.
Jeff Schuster, head forecaster for LMC Automotive, said the chances of a full-blown market-share war are remote because most North American assembly plants are working close to capacity.
He said: "I don't think [automakers] can build enough to feed it."
Company: Citi Investment Research & Analysis
Main point: A look at the scrapping cycle suggests that pent-up demand for new autos is starting to be unleashed.