TRAVERSE CITY, Mich. -- If this were a normal recovery, the auto industry should be selling a lot more cars than it is this year, says an economist.
But this is no normal recovery, said Itay Michaeli, director of Citi Investment Research and Analysis.
Speaking at the 2014 Management Briefing Seminars today, Michaeli said that longer vehicle life and families making do with fewer vehicles are having a profound impact on the number of automobiles sold.
The U.S. automotive sales rate for July was 16.5 million vehicles with year-to-date sales up 5 percent. “In a normal recovery, we should be at a 17.4 million,” Michaeli said.
He said that an annual survey conducted by Citi shows generational changes are slowing sales.
The main issue holding things back? It’s not consumers in their 20s postponing buying decisions. It is young families who don’t feel economically secure.
Respondents 35 to 44 years old should be buying an additional vehicle as they have children, Michaeli says, “but they are reluctant. They are afraid to buy a second car.”
Michaeli argues that job assurance programs from automakers that would allow consumers to get rid of a second vehicle should their personal finances deteriorate could help young families buy more vehicles.
The broader economy will continue to improve, but Michaeli says he sees the overall SAAR leveling off in the 17 million range through 2018.