LAS VEGAS - Despite a weak fourth quarter in 2000 and flagging consumer confidence, light-vehicle sales should hit 16 million units in 2001, an industry consulting firm predicts.
In its annual Automotive Franchise Assessment, J.D. Power and Associates stated that cautious consumer sentiment could swing the market by as much as 500,000 sales this year, but the overall market is still strong.
'The economy is definitely slowing, but it's not a recession or retrenchment,' said Steve Goodall, president of J.D. Power, at the company's International Automotive Roundtable here Thursday, Feb. 1.
'If people don't buy cars, it's because they don't want to, not because they can't,' he said. 'The slump in the stock market has frozen some people. The automobile is a postponable purchase.'
While growth in disposable income will shrink from 3 percent to 1.5 percent, it is nonetheless growth, Goodall noted.
Combine that with proactive interest rate cuts from the Federal Reserve Bank, and baby boomers in their peak earning years, and car sales should not slip too far from their best-ever year in 2000.
Unemployment is expected to rise to 4.5 percent from the current level of 4 percent, which should not cause too much damage to consumer spending, Goodall said.
The only reason sales would dip to the 15 million range or lower would be an external cause, such as a war or fuel shortage.
Among the other trends:
Sport-utility sales will pass mid-sized sedans as the largest segment in 2003.
Fourth-quarter 2000 sales were at a seasonally adjusted rate of 16.3 million units, but customer cash rose by $200 a unit over the third quarter.
Thanks to investment by foreign automakers, North American production capacity will rise by 1 million units by the end of 2002, then by another 1 million units by the end of 2004. However, while North American factories ran at 90 percent capacity in 2000, that will drop to 84 percent in 2001, 82 percent in 2002 and 80 percent in 2004.
In looking at individual automakers, Goodall said, 'GM is the most vulnerable in terms of capacity utilization and profit. Ford traditionally has the best capacity utilization but still will drop to about 85 percent. Toyota and Honda will be in the 90s after a couple years above 100 percent capacity.'