In December, the National Automobile Dealers Association (NADA) announced that new vehicle sales had increased in November, and that the market outlook over the next several months was strong. NADA Chief Economist Paul Taylor spoke to Aftermarket Business World about the trends in the market moving forward.
What are some of the factors that are driving the growth in new vehicle sales?
This is a market that is as much about necessity as anything, along with some improvement in consumer confidence. That has resulted in a sales uptick in the last four months of the year. The stock market has been performing relatively well, and that's usually associated with gifts of new vehicles during the holidays.
Year to date, we've seen about 11.47 million vehicles sold in 11 months [up from 10.4 million in 2010].
What do you mean when you say this is a market of necessity?
The average combined age for cars and light trucks is about 10.2 years of age, and that would normally be associated with mileages from 125,000 to 155,000. Some vehicles are getting long in the tooth and requiring more maintenance, and part of that calculus goes into the decision to buy. The other calculus is 'What's my trade worth?', and in that we've come off two very low years of new car sales, used cars are in tight supply, bringing stronger prices and value, so trade in is enhanced and these are incentives on new cars that bring down the effective cost of acquisition.
What do you see happening in 2011? Will growth continue?
The economy should create continued improvement in new car sales. There are just a couple of footnotes for that. First, the sub-prime new car buyer is not back to the level of financing that they would be getting several years ago. We are now will likely begin the year with gasoline prices over $3 per gallon. The extremely cold weather and demand for fuel oil is driving some increase in gasoline prices.
Even with this improvement, we're still a long way from the sales highs of several years ago. Is this the "new normal," or do you think the industry will get back to 16 to 17 million units annually?
The new census data reinforces that we're a growing country. While we're off the peaks from three years ago, we will eventually regain that household wealth that we had, and move beyond that. We averaged 16.5 million units for a few years, and we expect sales in years of growth to bring us to a level of at least 15 million eventually. We will surely see 17 million units again as well, it just won't be immediately.
What we're seeing in the data currently is that the overall strength of the economy is better than we thought. That should be the most important factor as we start calendar year 2011.
In December, the National Automobile Dealers Association (NADA) announced that new vehicle sales had increased in November, and that the market outlook over the next several months was strong. NADA Chief Economist Paul Taylor spoke to Aftermarket Business World about the trends in the market moving forward.
What are some of the factors that are driving the growth in new vehicle sales?
This is a market that is as much about necessity as anything, along with some improvement in consumer confidence. That has resulted in a sales uptick in the last four months of the year. The stock market has been performing relatively well, and that's usually associated with gifts of new vehicles during the holidays.
Year to date, we've seen about 11.47 million vehicles sold in 11 months [up from 10.4 million in 2010].
What do you mean when you say this is a market of necessity?
The average combined age for cars and light trucks is about 10.2 years of age, and that would normally be associated with mileages from 125,000 to 155,000. Some vehicles are getting long in the tooth and requiring more maintenance, and part of that calculus goes into the decision to buy. The other calculus is 'What's my trade worth?', and in that we've come off two very low years of new car sales, used cars are in tight supply, bringing stronger prices and value, so trade in is enhanced and these are incentives on new cars that bring down the effective cost of acquisition.
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What do you see happening in 2011? Will growth continue?
The economy should create continued improvement in new car sales. There are just a couple of footnotes for that. First, the sub-prime new car buyer is not back to the level of financing that they would be getting several years ago. We are now will likely begin the year with gasoline prices over $3 per gallon. The extremely cold weather and demand for fuel oil is driving some increase in gasoline prices.
Even with this improvement, we're still a long way from the sales highs of several years ago. Is this the "new normal," or do you think the industry will get back to 16 to 17 million units annually?
The new census data reinforces that we're a growing country. While we're off the peaks from three years ago, we will eventually regain that household wealth that we had, and move beyond that. We averaged 16.5 million units for a few years, and we expect sales in years of growth to bring us to a level of at least 15 million eventually. We will surely see 17 million units again as well, it just won't be immediately.
What we're seeing in the data currently is that the overall strength of the economy is better than we thought. That should be the most important factor as we start calendar year 2011.
