N.A. auto market seen outshining other regions, despite threats
Photo credit: Greg Horvath
TRAVERSE CITY, Mich. -- Auto sales will continue to rise in North America through 2020 despite lingering effects of the 2009 recession, economist Jeff Schuster predicted today.
Schuster, senior vice president of LMC Automotive, said slowing global growth and market declines from once-hot Brazil, Russia, India and China means global growth will be at a more muted rate than in North America.
“We’re just in the heart of a very good marketplace right now” in North America, Schuster said at the 2014 Management Briefing Seminars.
Automakers and suppliers are much leaner now than they were before the recession, with the vast majority of factories operating on three shifts.
“We’re in a very different marketplace at a 17 million SAAR than the last time we were at that level” before the recession, Schuster said. Fleet sales are down from 22 percent of sales to a more healthy 18 percent, and factory utilization above 90 percent, he said. SAAR stands for seasonally adjusted annual rate. The U.S. SAAR for July was 16.5 million.
But he said that the expanding use of global platforms by automakers means that suppliers must keep close tabs on their business plans “to make sure you’re on the right programs.”
Schuster said the U.S. SAAR will continue to improve til 2020. Even in his worst-case scenario it reaches 16.7 million with a potential upside of 18.3 million.
Several demographic factors are affecting sales, including older consumers delaying their retirements and younger consumers delaying full entry to adulthood by continuing to live at home and postponing marriage.
Automaker and supplier profits may lag vehicle sales, Schuster warned.
“Incentives are going to be something to watch,” he said, as increased competition holds average transaction prices relatively constant over the next several years.
He also said that a robust product introduction plans would lower volumes on individual models.
You can reach Larry P. Vellequette at email@example.com.