Downgrades Coming In for 2008 U.S. Vehicle Sales Forecasts
By Michelle Krebs July 23, 2008By Michelle Krebs
With the books closed on first-half U.S. vehicle sales and a July that mirrors June's weakness, industry experts are revising their full-year forecasts downward. They warn 2009, once expected to be a turnaround year for many automakers, may look similar to 2008 in terms of vehicle sales.
The latest downgraded forecasts came Wednesday from Germany's Deutsche bank and U.S. market research firm, J.D. Power and Associates. Deutsche Bank said yesterday that auto sales in the U.S. may drop to 14 million cars this year, down from a previous estimate of 14.5 million, the lowest st in 15 years. J.D. Power lowered its prediction for 2008 sales to 14.2 million vehicles from its previous forecast of 14.95 million, the lowest level since 1993.
The downgraded forecasts from Deutsche Bank and J. D. Power are even lower than that of Renault-Nissan CEO Carlos Ghosn, who has been accused of being the most pessimistic in the industry the past couple of years but has wound up being on the mark. On Tuesday, he predicted U.S. sales in 2008 would come in at 14.3 million vehicles.
Edmunds.com, parent of AutoObserver, downgraded its forecast for 2008 in June to 14.8 million vehicles sold.
Weak Economy, High Gas Prices, Lower Fleet Sales Converge
In a statement distributed Wednesday, J. D. Power said its took 750,000 vehicle sales out of its original forecast because of a deteriorating economic environment, prolonged effects wrought by the credit crisis, elevated gas prices and a reduction in the daily rental fleet market.
If J. D. Power's forecast proves correct, 2008 sales will show a 12-percent decrease from the 16.1 million sold in 2007 and mark the lowest sales level since 1993.
Fleet Sales Plummet
Detroit automakers have worked to reduce unprofitable sales to daily rental fleets in recent years, and apparently are staying true to that commitment even as retail sales drop.
J. D. Power projects fleet sales will drop to 2.6 million units in 2008 -- a 21-percent decrease from 2007. At the same time, retail sales will decline 10 percent to 11.6 million vehicles.
"While the sluggish economy is the primary driver of the reduction in retail sales, fleet sales are expected to experience an even steeper decrease from 2007," said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates. "This trend indicates that the automotive industry is making serious efforts to continue reducing fleet sales, while also allowing retail sales to work through the downturn without heavy use of incentives."
Small in Short Supply
The dramatic and rapid shift of consumers buying small, fuel-efficient largely four-cylinder cars instead of large vehicles has been well documented in recent months. But, notes J. D. Power, the growth in smaller vehicles has been unable to offset the even heftier declines in larger vehicles.
The firm notes that retail sales for the compact basic segment from January to June 2008 were up 28 percent compared with the first half of 2007. In contrast, sales in the first half of 2008 for all vehicles in the large segments, which include large pickups and SUVs, were down 26 percent, compared with the same time period in 2007.
Part of the reason growing small vehicles haven't offset declining large vehicle sales is because of capacity constraints.
Indeed, Mike DiGiovanni, General Motors' executive director of Global Market & Industry Analysis, said in a conference call with analysts and media Wednesday that conservatively sales could be running 200,000 to 300,000 units above where they are if automakers had enough small cars to meet demand.
2009: Not Looking Much Better
With July sales looking to be as bleak as June's, the prospects are increasing that 2009 will look a lot like 2008.
"The economic stress and uncertainty that consumers may face over the next six to 12 months will likely result in a continuous period of slow new-vehicle sales," said J. D. Power's Schuster. "It is also unlikely that a pronounced rebound will occur in 2009 and conditions could actually worsen before they improve."
J.D. Power and Associates projects only a slight sales improvement to 14.3 million units in 2009, with an increase in retail sales to just 11.7 million units, and fleet sales remaining essentially unchanged at 2.6 million units.
Nissan-Renault's Ghosn said Tuesday he predicts another 14.3 million year for the U.S. in 2008.
GM's forecast at 14.5 million to 14.9 million for 2008 calls for the uptick to begin late this year. DiGiovanni predicts all-important housing starts will bottom out and turn positive as the U.S. moves toward 2008. An upturn would be bolstered if oil prices stabilize even at the relatively high levels of $127 to $130 a barrel of late, he added. "People will adjust if they stabilize," he said. "We don't see great gangbuster growth in the second half but gradual improvement and even more in 2009."
Ford expects no improvement in 2009, with the upturn beginning in early 2010 and returning to 17 million vehicle sales levels after that.
LEAVE A COMMENT
I hate to say it, but I think the market will get even worse with inflation spiraling out of control, minimum wage increasing, employment becoming even harder to find, and hundreds of billions of dollars being used up in war. It really seems we've hit a perfect storm.
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