The U.S. auto industry is poised for a sequence of 1 percent sales gains over the next five years, fueled largely by a stable economy and a proliferation of SUVs.
Steve Goodall, CEO of J.D. Power and Associates, said population growth combined with the baby boom generation reaching its prime earning years means increased demand for new vehicles.
Posing risks to this scenario are the possibility of higher inflation due to the growing federal deficit and the chance of higher energy costs and global instability.
Goodall points out that the role of the vehicle in U.S. households is changing.
In the 1970s, there was one car for every household. In the 1990s, it was one vehicle for every driver. Now, it will be one vehicle for every purpose, Goodall said at the J.D. Power International Automotive Roundtable here Thursday.
As a result, consumers demand fresher vehicles. The duration of product cycles is shortening. Sometimes it is incrementally, as with the BMW Z4 moving from a six-year cycle to five, or strikingly, as with the 10-year Chevrolet S10 cycle being cut to six years for the Colorado pickup replacement.
The number of models offered has increased from 231 in 1998 to 272 in 2003. By 2008 that will increase to 311 models, Goodall predicted.
In the 1998 to 2008 period, the biggest segment gainers will be SUVs, which will gain 57 models in that time.
Power includes crossover vehicles based on cars in that category.
Though SUVs will gain 2.2 million units of volume in that time, it also means that 35 of the 38 brands will offer an SUV, Goodall predicted.
A question arises: Can the industry handle all those extra entries? Already, incentives in the major SUV segments are well above the industry average.
While the average industry incentive per unit is $2,420, mid-sized
SUVs carry a $3,332 incentive, while full-sized SUVs have $3,965 in incentives on every vehicle, according to Power Information Network numbers.