That’s No Surprise When You Look At Latest Sales Forecasts
13 Million Expected For 2011; Onwards And Upwards To 15 Million?
The buzz and expectation from the Detroit Car Show showed that the U.S. industry has its confidence back after both had emerged from a near-death experience.
When General Motors and Chrysler were bankrupt and Ford hanging on by its fingernails, there were some expectations that the “Big Three” and the show itself might not make it through the night.
Maybe Chrysler employees would look a bit shamefaced if it tried to pass itself of as a major player again yet, but with its link to Fiat providing a life-line of fuel efficient technology, the company provided presentations of swagger and pizzazz, headed by the launch of the new 300C. Slimmed-down GM gave pride of place on its stand to its North American Car of the Year, the extended range-electric Chevrolet Volt. Ford showed off the Focus, about to go on sale in Europe and America.
Porsche returned after a three-year absence and wowed the crowds with its 918 RSR concept. The only major absentee was Nissan, surprising this, given that its electric Leaf is about to go on sale across America and Europe.
But it was the forecasts of strong sales increases in the U.S. this year and beyond that was behind the added bounce in the step of manufacturers here.
“In our view there was quite a lot of excitement compared to the past 2-3 years, with corporate parties everywhere and attendance at an investor conference up 100 per cent. There has been a sharp contrast with the past several years when industry talk was that the show might disappear. All major manufacturers, ex-Nissan, were back with full displays,” said UBS Investment Research auto analyst Philippe Houchois.
Other analysts picked up the excitement vibes.
“Not a single presentation was negative on the North America 2011 prospects, sharing our view of an upcoming cyclical/structural recovery of U.S. demand,” said Deutsche Bank’s Gaetan Toulemonde.
Consensus 13 million
“Sales expectations were consensually at the 13 million level (Deutsche Bank has since raised its forecast by 500,000 to 13 million), and given the significantly improved demand-supply balance, the accumulative industry profit should be notably higher than on a pre-crisis-level. All European manufacturers shared the positive industry mood. BMW expects the U.S. market to overtake Germany for the first time, Mercedes expects a new global sales record in 2011, supported by U.S. growth,” Toulemonde said.
“With VW about to ramp up its new Chattanooga facility, the U.S. market is consensually seen to be a positive earnings driver for all players, including the European supplier base,” Toulemonde said.
And the latest U.S. sales forecasts are in sharp contrast to Europe’s, which relentlessly point to a year of stagnation.
J.D.Power now expects 2011 U.S. sales to jump 12 per cent to 13 million, compared with 2010’s 11.6 million.
U.S. light vehicle sales hit a 27-year low in 2009 of about 10.5 million.
“Optimism is increasing for the auto industry following a stronger outlook for the economy,” said J.D.Power executive director Jeff Schuster. “GDP growth is expected to be in the three to 3.2 per cent range for 2011. As the macro drivers continue to improve and credit availability increases, further upside potential remains,” he said.
Morgan Stanley remains the most optimistic of forecasters, reckoning sales will hit 14 million in 2011. Morgan Stanley expects a “V” shaped recovery, driven by among other things pent-up demand, high used vehicle prices, and improved credit availability.
Latest information from Washington showed U.S. economic growth accelerated as Americans spent more, rising at an inflation-adjusted annual rate of 3.2% in the last three months of 2010 compared with a 2.6% increase in the third quarter.
Consumer spending, accounting for about 70% of demand in the U.S. economy, rose 4.4% in the fourth quarter. The U.S. economy has been slow to recover from the deep recession that ended in June 2009, but the holiday season at the end of last year saw some shoppers return, lured by continued low prices and a small improvement in the jobs market.
Deutsche Bank also raised its forecast (before the latest data from Washington) for 2012 to 13 million, with a powerful upsurge after that.
“Over the medium term, we have confidence that the trend demand in the 15 million range will be achieved,” Deutsche Bank’s Auto Weekly said.
Price Waterhouse Coopers Autofacts was a little less exuberant.
“Autofacts modelling indicates that 12.5 million units of U.S. light vehicle sales is a realistic scenario for 2011, even without substantially improved employment figures, a major upturn in housing, or rapid credit expansion,” Autofacts said.
UBS’s Houchois listed what he called his subjective impressions as he toured the show.
- German’s square footage up considerably with world premiers of the new 6 from BMW, CLS from Mercedes, A6 from Audi which had the biggest German stand.
- VW’s new U.S. vehicle ends up being named Passat and looks like the European one although on slightly different/cheaper platform. In our view product looks bland on style but execution and perceived quality quite high.
- GM products all over the place with Buick excellent, Chevrolet very mixed with old and new. Volt electric vehicle prominent.
- Ford almost owns the show with an upbeat stand and all products less than 3 years old and promoting global platforms.
- Chrysler products much improved across the board: Durango, Grand Cherokee and 300 all at best in class standards and competitive. New 200 looks bland.
- Toyota came across as defensive in our view in its presentations. Products on display all look reliable but a bit dull.
- Honda promoting new Civic and Odyssey minivan but rest of the range looks old and feels outdated, in our view.
- Hyundai very impressive with fresh lineup and very good execution versus Kia looking a bit more like Honda with mix of new and tired products.
Neil Winton – January 31, 2011