billddrummer

Ford, GM Expecting Lower Car Sales Than They Forecast

Hi Judy,

Great coverage, thanks!

I think car sales will come in at fewer than 10 million units this year, and here's why:

1) Consumers who are looking to purchase new cars will still have trouble qualifying for affordable car loans. Even with the recent relaxiing of GMAC standards, the car loans granted will have higher interest rates because of risk aversion. As a consequence, buyers will look to clean used cars, rather than new ones, for satisfaction (re/CRMT)..

2) No compelling new models have been introduced for the 2009 model year from any of the domestic 3. The buzz surrounding the Chevy Volt is strong, but it won't be available until 2010, and will cost $40,000, far out of reach of many families.

3) Lease financing will still be tough, and will revert to the beginning of the lease phenomenon, when you needed sparkling clean credit to qualify.

4) Existing vehicles are lasting nearly 8 years, compared to 5 years at the beginning of the decade. The manufacturers have engineered long-lasting cars that don't need replacement as frequently, thus allowing buyers to hold off purchases until their personal balance sheets improve.

5) Gasoline will rise this year, and may reach $3.50/gallon by summer. If it only rises by $1/gallon I'll be pleasantly surprised. But with the domestic carmakers still emphasizing trucks and SUVs over fuel-efficiency, sales will crash for those segments in lockstep with higher fuel costs.

6) Uncertainty regarding employment will dampen demand for the entire year. People won't want to get into a 4-6 year auto contract if they feel their job is in jeopardy.

I think these factors will combine to suppress demand in 2009, and the projections announced in December 2008 will look wildly optimistic by August 2009.

That's my take on it. Keep up the great work!!!

ATB,

Bill