Car Sales, Stock Market Swings Related
Gyrations in stock markets and talk of a weakening economy have rattled customer confidence in buying new cars.
It's an increasingly common reaction among would-be car buyers that has dealers and automakers worried. In May, many believed sales would reach a healthy 13.5 million this year — halfway between their peak in 2005 and their 30-year low in 2009.
Now, such forecasts seem overly optimistic. Analysts say the swoon in financial markets and economic uncertainty could reduce auto sales by a few percentage points, shrink earnings, and delay hiring in an industry that has been a recent leader in job creation.
Any reduction in sales would be especially painful for Toyota and Honda dealers, who are just starting to restock their showrooms after months of shortages brought on by Japan's earthquake.
In a sign of how sensitive buyers have become to stock swings, showrooms are active on days the market is up, but empty when it's down. The Dow Jones industrial average has fallen ten percent since July 22, with wild swings up and down along the way.
The lack of confidence isn't what car dealers want to hear, especially in August, usually a strong sales month as dealers clear lots of 2011 models to make room for 2012 cars and trucks. Carmakers report August sales in the U.S. on September 1.
Dealers say sales likely won't collapse in the second half of 2011, as they did in 2009. That's because banks are lending more freely, and lease deals, which went away during the recession, are making a comeback. Also, older cars will still need to be replaced. The average age of a car in the U.S. is 10.6 years, up more than a full year from 2008, according to the research firm Polk.
J.D. Power and Associates cut its 2011 sales forecast last week by two percent, to 12.6 million new cars and trucks. It cut its 2012 forecast by three percent, to 14.1 million. Ford Motor Co. is sticking with its sales forecast of around thirteen million for the year.
"We're not getting back to what was considered normal or healthy as quickly as possible, but it's still a pretty strong progression," says Jeff Schuster, Executive Director of Global Forecasting for J.D. Power. Sales bottomed at 10.4 million in 2009.
Since that year, the U.S. auto industry has grown remarkably, adding jobs faster than the economy as a whole. The industry has added about 77,000 jobs since June of 2009. That's an increase of twelve percent, compared with a rise of 0.2 percent for the economy overall.
People looking to buy a car later this year could benefit from any reduced demand today.