Europe Will Languish While U.S. Spurts
Dollar Strength Allows Germans To Sell Less, Make More
Auto sales in the U.S. will recover significantly in 2011, despite the unexpected slowdown in 2010, according to Bernstein Research analyst Max Warburton.
Warburton said the U.S. market could improve by at least 20 per cent in the medium term, with annual sales perhaps of between 14 and 15 million, while lack-luster Europe can only expect a 10 per cent improvement from its current doldrums.
“U.S. automobile buyers seem to be behaving in an even more conservative manner than consumer confidence, unemployment and housing starts data would normally imply. We are cutting our 2010 volume estimate to 11.8 million to reflect the weaker first half outcome, but include our assumption that second half sales will exceed a SAAR (seasonally adjusted annual rate) of 12 million,” Warburton said in a report.
Bernstein’s previous forecast was 12.5 million auto sales for 2010.
U.S. forecaster J.D.Power recently shaved its prediction for 2010 sales to 11.7 million, down from its previous forecast of 11.8 million.
“Our forecasting model also points to a very significant improvement in volumes into next year. We are therefore leaving our 2011 forecast of 13.8 million unchanged. We continue to believe U.S. car sales can – and will – recover significantly. Recovery may have been postponed, but it has not been called off. We therefore still see a profit growth opportunity for the Germans, Renault-Nissan and Fiat-Chrysler in the U.S.,” he said.
Dollar strength
The dollar’s recent strength against the euro means that the Germans – Volkswagen-Audi, Mercedes, BMW and Porsche – will not see any fall in profits despite lower sales. As the dollar strengthens against the euro the likes of BMW are able to price their products lower, or take higher profits, or a combination of the two.
Warburton said volumes in the U.S. are at a low level not seen since the 1960s, but with a much bigger population now and increased personal automobile use, this is set to change, and soon.
“While a return to the 16 to 17 million seen in the mid-200s may not be imminent, we are convinced that 14 to 15 million is a realistic medium term level for the U.S. This means that the U.S. has 20 per cent or more recovery potential – superior to Europe where we see about 10 per cent upside to normal form current levels,” Warburton said.
Neil Winton – August 1, 2010
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