U.S. Light Vehicle Sales Will Recover Slowly

In a forecast that mirrors one issued last week from the respected Center for Auto Research, a West Coast consulting firm says that the U.S. light vehicle market is expected to close out 2009 at a mere 10.3 million sales, down from 16.1 million sales only two years ago.

This is the lowest industry volume since consultancy AutoPacific began forecasting automotive sales in 1988. The ongoing Great Recession and a jobless recovery will continue to have a negative effect on retail sales of light vehicles.

The industry can look forward to year-on-year recovery during five-year forecast period, but at a relatively gradual pace. In the near term, AutoPacific forecasts industry volume of 11.4 million units in 2010, as unemployment hampers a faster industry sales recovery.

The year 2015 will see industry sales of 15.4 million, a significant improvement from 2009 volumes but still far from the near 17 million unit years seen through much of the past decade of lax government regulation and bubbles in technology, housing and financial sectors.

“Even with the gradual recovery of the economy, many Americans will need to address serious near-term issues such as loss of personal savings and wealth as well as focusing resources on projects, such as home repairs, that had to be deferred due to the recession,” said Ed Kim, Director of Industry Analysis at AutoPacific.

“Because today’s vehicles are more durable and long lasting than ever, consumers are able to put off new vehicle purchase for much longer than they have been able to in the past. This dynamic will hamper industry recovery in the near term,” said Kim.

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Despite the loss of several brands over the past year, AutoPacific still expects nearly 300 individual vehicle nameplates in the marketplace in 2015. By comparison, there were only 198 nameplates in 1998, which was the last time industry volumes were at around 2015’s expected level of 15.4 million units.

Therefore, automakers will be fighting for a piece of a much smaller pie.

Profitability at these lower volumes will represent a challenge, especially when the drive towards greater fuel efficiency will add significant cost to upcoming new vehicles.