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U.S. Market Will Improve, Radically, Say Some

Consensus For 2011 Is Close To 12.7 Million, But 15 Million Mooted

It looks like stagnation for Europe next year, but some analysts are busily junking their conservative projections for U.S. car sales in 2011 in favour of much more aggressive targets of up to 15 million.

2010 is expected to end up at around 11.5 million light vehicle sales, about 10 per cent better than 2009’s 10.4 million.

According to Morgan Stanley analyst Ravi Shanker, U.S. sales next year will soar to 14 million, as improving credit quality and availability kick start sales.

“We believe the industry is set to exit the year at a 12.3-12.5 million SAAR run rate for the fourth quarter, setting up for a strong 2011. We continue to expect 14 million SAAR next year,” Shanker said.

Consumer confidence is improving too, says ratings agency Standard & Poors.

“We believe recent monthly auto sales, including November’s, indicate that consumers are increasingly more willing to make big-ticket purchases than they were earlier in the year,” said S&P analyst Robert Schulz.

Too many weaknesses
Morgan Stanley’s prediction is way above consensus, which sits at a much more conservative 12.7 million. IHS Automotive, with a 12.8 million prediction, said there are too many weaknesses in the economy to justify a bigger prediction, with jobs, housing and credit all huge drags on the market. IHS Automotive won’t rule out the possibility that short-term, the market might even slide in the first half.

But weighing in on the plus side, Bank of America Merrill Lynch slaps down an even more adventurous forecast of 15 million in 2011.

“We believe the cyclical recovery is still being underestimated and undervalued by the (stock) market and that there is still near-term upside in may auto stocks,” Merrill Lynch analyst John Murphy said.

Deutsche Bank analyst Gaetan Toulemonde agrees it is likely the strength of recovery is creeping up unnoticed.

“Our forecasts of 12.5 million for 2011 and 13.5 million for 2012 look increasingly conservative and we believe automakers may guide to more optimistic demand trajectories for the U.S. when they start to discuss 2011 at the Detroit Auto Show in January,” Toulemonde said.


Neil Winton – December 15, 2010

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