Auto Sales Finishing 2010 Strong, But Recovery Will Be Slow In 2011

December 27, 2010
Cadillac dealership

Cadillac dealership

While the U.S. auto market outlook can hardly be called bullish, sales this past month are pointing to some growth, and some further steps toward a rebound, in 2011.

And that rebound still looks quite far away. AutoPacific is anticipating 12.4 million next year, and J.D. Power predicts that U.S. sales will reach 12.8 million next year and potentially a 15-million rate by 2012. Meanwhile Edmunds is anticipating a sales rate of 11.5 million vehicles for 2010 and predicting 12.9 million vehicles sold in 2012. For full-year 2010, J.D. Power is anticipating 11.6 million vehicles sold, and AutoPacific anticipates 11.4 million sales—the same figure that it predicted for 2010 a year ago.

One positive indicator is that even as retail sales are perking up, automakers have reduced new-car incentives levels to their new vehicles, on average, compared to earlier in the economic slowdown. That's potentially related to the easier availability of credit and financing options the past several months, but also due to the introduction of a range of desirable new mass-market vehicles including the new 2011 Chevrolet Cruze, 2011 Hyundai Sonata, and 2011 Kia Optima.

Another piece of good news is the growth in retail—as opposed to fleet—sales. According to Edmunds, sales earlier in the year had been supported by growth in fleet sales, as both rental-car companies and corporations moved to replace vehicles. However, at the end of the year, retail sales are showing signs of a serious recovery, with the retail sector up from 710,000 last month to an expected 912,000 this month, according to Edmunds, while Power puts total light-vehicle sales at their highest seasonally-adjusted level all year.

But as far as five years into the future, AutoPacific doesn't see the U.S. industry returning to the 17-million unit volumes that were seen not so many years ago, however. Rising prices, due both to new vehicle technologies and the upcoming federal fuel economy (CAFE) rules, will limit market expansion, the firm said.

"Even with economic recovery, various economic indicators such as consumer confidence, home values, and perhaps most tellingly, unemployment, remain at worrying levels," said Ed Kim, Director of Industry Analysis at AutoPacific.

AutoPacific emphasizes that the U.S. market will continue to further splinter and segment into smaller niche models and nameplates—meaning that there might be 320 nameplates or more in the market by 2016, which is the last time volume was at the 15.7 million rate predicted for 2016. "Thus, each nameplate will be fighting for a smaller piece of the pie, making it tougher for each of those nameplates to be profitable," argues the firm in a sales forecast.

[AutoPacific; Edmunds; J.D. Power and Associates]

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