Gloomy Predictions For Auto Market

Anthony Fontanelle
December 16, 2007

The housing market in the United States is said to be punishing the auto market according to experts. Auto sales have dropped as more consumers are focusing on their mortgages. And the problem of the auto industry is not about to end suddenly. CSM Worldwide forecasted that next year, light vehicle sale will drop to 15.8 million, the lowest level in ten years.

Joseph Barker, senior manager of North American Sales Forecasting cited several reasons for the expected decline in vehicles sales in the United States. He said: "The market will linger in a cyclical contraction phase. The downturn was triggered by diminished consumer purchasing power, depleted pent-up demand, and structural changes at Detroit automakers."

CSM also pointed out that falling home values, increasing prices of petroleum fuel, and increasing adjustable-rate mortgages would make consumers forego purchasing a new vehicle. The prices of almost all commodities are on the rise and inflation will no doubt make the situation worse. These are the reasons why a lot of consumers are no longer interested in changing their car in the very near future.

From 2002 to 2005, the demand for automobiles has increased to a very high level. This year though, the demand has been depleted and it will be a matter of years before consumers once again feel the need to purchase new vehicles. This is a challenge to automakers. This year, 50 new vehicles were launched and another 50 will be unveiled next year. Even with that number, automakers would still have to work hard to lure consumers into their dealerships.

The changes in Detroit are also expected to put a huge dent in auto sales. "Old-Detroit thinking is finally collapsing to a new era that places emphasis on smaller, more profitable quantities and resuscitating ailing brands," said Barker.

By the end of the year, CSM projects that the General Motors, Ford, and Chrysler will post a collective 2.1 million decrease in sales for the last five years. Next year, it is expected that sales for the Big Three will decline by 500,000 units. In contrast, Asian automakers are capitalizing on the misfortunes of the Big Three. It is expected that combined, Asian automakers will sell 100,000 more units next year compared this year. That does not include sales of Asian automaker's auto parts such as Acura CL alternators and other components.

Barker though pointed out that not everything is going wrong. "Though most market metrics will be battered next year, our sales outlook is not as pessimistic as the consensus," he said. "The unemployment rate is low, additional interest-rate cuts are likely, and GDP growth continues to exceed expectations. We also cannot underestimate the resiliency of consumers."

Source:  Amazines.com