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Ageing Vehicles, Internet Connectivity To Spur U.S. Sales

“70 million vehicles on the road today were purchased during Clinton’s presidential term or even earlier”

Sales in the U.S. may have stuttered in May, but the longer term future looks healthy as buyers return to the market to replace ageing vehicles, according to a report from German consultants Roland Berger.

Recent improvements in the economy and credit availability will help, while demands for internet connectivity will excite some buyers.

Berger predicts growth of nine to 11 per cent in 2012 and 2013 with sales peaking at 16.5 million in 2015.

U.S. sales were more than 16 million in 2007, but dived to 10.4 million in 2009. Standard & Poors expects sales to hit 14.2 million in 2012.

“Is this the start of a healthy recovery or just a flash in the pan? We believe that it still will take a number of years before the U.S. market sees its previous levels of 16 to 17 million units per year again, but there are good reasons to expect stable growth in years to come,” Berger said in a report in its latest Automotive Insights publication.

Berger cites three main reasons for the recovery

  • Need to replace ageing vehicles
  • Scrapping rate exceeds new car sales
  • Improvements in unemployment, consumer confidence and credit

“One key reason is that the average age of vehicles in the U.S. is almost 11 years. In other words, half of the total U.S. fleet of around 240 million vehicles is more than 11 years old, of which about 50 million vehicles are up to 15 years old, and 70 million vehicles on the road today were purchased during Clinton’s presidential term or even earlier,” the report said.

“2011 was the fourth year in a row in which the estimated scrappage rate for cars exceeded that of new car sales. Given that mobility is not decreasing, more new cars will have to be sold in the future to make up for the difference.”

“Despite current economic uncertainty, the U.S. has seen recent improvements in the unemployment rate, improved consumer confidence and an easing of credit requirements by financial institutions,” the report said.

Consumer demands are changing too, with fuel economy, downsizing, design, and internet connectivity high on the list.

“Until recently, fuel efficiency was something only Asian and European automakers really cared about. Now Ford, GM and Chrysler getting in on the act. Ford and GM both now offer only four-cylinder engines for vehicles up to mid-size sedans. At least 40 mpg appears to be the new norm,” the report said.

Diesels gaining
Diesels are gaining, although this still plays a minor role. The ultimate role of electric vehicles is still uncertain.

“Perhaps the most unique trend in the North American market is the growing importance of connectivity as a purchase criterion. Americans often drive long distances. They spend an average of one and a half hours a day in their vehicles. As a result, providing digital services inside the vehicle has massive potential for revenue generation,” according to Berger.

Neil Winton – June 15, 2012

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