US auto market driven by used car sales trends

Consumer demand

SHARE THIS STORY

US autos Oct13September wasn’t such a good month for US auto sales, as the chart shows.  It was the first time since May 2011 that sales were below those of the same month in the previous year.  Was this just a blip, explained by the fact that August was strong due to Labor Day being very early in September?  Or was this a sign of a changing trend?

A lot hangs on the answer.  Auto sales have powered ahead since 2011, with some analysts suggesting they could regain the 15 – 17m levels seen routinely from 1995 – 2007.  This has been great news for the economy, and for suppliers to the industry.  But the blog is more cautious.

The reason is that a large part of the strength in new car sales is due to high prices for used cars.  Sales of these cars dominate the market, with analysts expecting 41.25m to be sold in 2013 versus 15m new cars.  And used car prices have been sky-high recently, encouraging buyers to buy new, as the New York Times reports:

“During the recession, consumers stopped buying new vehicles and automakers trimmed production, eventually creating a shortage of the most sought-after used vehicles – later models with low mileage. Used-car prices surged.”

Only 10.4m new cars were sold in 2009, and just 11.6m in 2010.  So until recently there has been a great shortage of reasonably priced used cars available for sale.  Average prices today are thus $17926, compared to $14976 in 2009.  In turn, as the blog noted last month, auto makers have cleverly offered leasing deals for new cars that often make it possible for a used car buyer to afford a new car instead.

But now the dynamics of the used car market are changing, as the higher volumes of cars sold in 2011 onwards start to hit the dealerships.  Thus industry analysts Edmonds.com forecast the market is at a tipping point, where supply/demand for used cars is already starting to rebalance:

“Even though there’s a decline, prices are still high for used cars. It’s definitely a better time to buy than last year, but if you can wait, prices are just going to keep going down.”

Equally important, say dealers, is that buyers have a limited budget when they do go out to buy:

“For the foreseeable future, late-model compact and midsize cars and small sport utility vehicles …are in demand.  It’s that $12,000 car that’s the perfect sweet spot, the kind with a $250-a-month payment.”

The clear conclusion is that nobody really knows what may happen next in the US auto market.  Any company betting its future on just one outcome may find they have chosen right.  But companies that instead test their plans against a variety of possible outcomes will dramatically improve their chances of success.

PREVIOUS POST

Grangemouth closure could force downstream converters to shut

23/10/2013

  One never wants to see a major petchem plant shutdown, especially one wit...

Learn more
NEXT POST

India's onion harvest boosts auto sales: Japan's sales gently decline

25/10/2013

The blog’s pre-Budget Outlook review of the major auto markets concludes t...

Learn more
More posts
PlasticsEurope calls for mandatory 30% recycling target for packaging by 2030
12/09/2021

The European plastics industry last week took the crucial first step in moving away from virgin plas...

Read
Samsung stumbles in global smartphone market as Xiaomi overtakes Apple
08/08/2021

Smartphone sales confirm that global markets are continuing to pivot to the New Normal world. Back i...

Read
Brand-owners start to focus on renewable carbon
13/06/2021

The original debate on plastics recycling owed its prominence to Ellen MacArthur, the yachtswoman wh...

Read
“One size no longer fits all” as the global smartphone market breaks down into different segments
30/05/2021

The pandemic was very good news for some companies, with demand for online activities rocketing. But...

Read
Biden’s Earth Day Summit puts plastics recycling on the fast track
25/04/2021

Plastics has long been the ‘odd one out’ in terms of recycling. Steel, aluminium, glass,...

Read
Americans hunker down on spending as the pandemic’s impact continues
11/04/2021

US stock markets have been hitting new records recently, as investors swoon over the idea that the $...

Read
Circular economy set to replace today’s broken global supply chains
21/03/2021

The Great Freeze in Texas has confirmed once again the problems with today’s global supply cha...

Read
Smartphone sales highlight new trends in consumer markets
07/02/2021

Smartphone markets continue to provide early warning of the major changes taking place in consumer m...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more