- 2013 volumes at 15.6 million were the highest since 2007 (red square)
- This was a 7% increase versus 2012 levels (green line)
- Q4 sales at 3.8m were particularly strong, and were the highest since 2005
Unsurprisingly this has led many to believe that the crisis is now over, as far as car sales are concerned. Their only question is how high volumes can go this year, with GM forecasting a further rise to 16 – 16.5m sales in 2014.
The truth seems more complex, however:
- Used car prices remained at historically high levels, often making it cheaper to buy a new car on with a 0% loan
- Poor new car sales between 2008-11 meant that the number of prime 2 – 5 year old cars was sharply reduced
- Analysts Manheim note that there were “intense increases in prices when supply shortages were very severe”
- One warning sign of possible weakness is that dealer inventories for new cars are now at an 8-year high
This matters because, of course, the used car market is far larger than the new car market. Even more important is that the US auto fleet has been in decline since 2008 when it was 137m vehicles, versus 126m in 2011 (latest data).
In addition, the average age of the auto fleet is continuing to increase. It was 11.4 years in 2013 according to Polk, an increase of 3 years since 1995. This is partly due to improvements in manufacturing. But it also relates to the fact that Americans are driving fewer miles each year.
Nobody knows how these trends will play out in the future, as they represent a New Normal. But companies that read-test their strategies against several different Scenario, will likely be far more successful, than those who simply assume the good times will now roll on forever.