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20 Million Vehicle Sales by 2017?

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TrueCar’s Scott Painter optimistically thinks U.S. light-vehicle sales will hit a milestone sooner than later. Well, let’s hope he’s right. 

 

Jim Press energetically trotted on stage for a conference speech during which he predicted annual U.S. light-vehicle sales would top 20 million units in a few years.

That was about a dozen years ago. Until recently, it was the last time I had heard such an optimistic forecast.

Press was a Toyota executive when he boldly predicted the auto industry would soon enter a “golden” age with sales of 20 million a year. Well, that didn’t happen.  

He had reason for optimism. At the time, annual auto sales were at a full gallop, passing the 17 million mark in the early 2000s.

But then things got bad. Press left Toyota to join Chrysler’s executive ranks. He was out of a job when Chrysler tanked along with the industry and the U.S. economy.

That was in 2009, the year hobbled U.S. vehicle sales fell to 10.6 million. Near as I can reckon, that’s about half of the 20 million the industry was supposed to be enjoying by then.

Since the perilous free-fall, post-recession auto sales have been steadily improving. So when might we see 20 million?

Hold your horses. Most prognosticators don’t think sales will climb that high in the near future. But Scott Painter does. The head of TrueCar.com, a firm that provides sales leads to dealers and vehicle-pricing details to consumers, says it’s possible the industry will reach 20 million in just four years.

But it would depend on the industry embracing pricing transparency along with a smooth, quick and user-friendly dealership process, he says after walking, not running, on stage at a recent J.D. Power automotive conference session.

Painter reasons customers who enjoy such an improved car-buying process would partake in it more often, thus driving up sales. Here is how TrueCar Executive Vice President Larry Dominique explains it to me:

“The average consumer buys a vehicle every 5.9 years. A lot of people are hesitant to return to a dealership, because they go through a painful car-buying process.

“Through transparency, upfront and fair pricing, they don’t have to worry about stress points. It helps the customer expedite the process. That can turn more people and turn inventory faster.”

I suspect it would take more than delightful dealership experiences for sales to suddenly accelerate to 20 million in a few years.

Perhaps people who count ample disposable income as one of life’s pleasures will visit a dealership more often because it’s so nice there, just as diners may regularly frequent a favorite restaurant.

But at a time when the average price of a car is more than $31,000, other purchase considerations besides dealership ambiance come into play. Those include people asking themselves: “Can I afford to buy a new car right now?” Will 20 million of them say yes in 2017?

WardsAuto forecasts vehicle sales of 15.6 million this year, and 16 million or perhaps a bit more in 2014, barring a major setback.

In 2011, analysts were saying we wouldn’t hit 16 million units until 2016.  “Sixteen in ’16” was a catchphrase back then. That sounded better than people in 2009 calling 15 million “the new normal.”

To some industry seers, 20 million looks do-able by the end of the decade. But by 2017 seems premature. It would require serious economic growth. It assumes pent-up demand won’t ease up. Then there’s the issue of whether auto makers could ramp up production so much so soon.

Twenty million in ’17 is a stretch. But if it turns out TrueCar is right, no one will beef about it.

Discuss this Blog Entry 3

on Dec 28, 2013

Ricky Beggs, Editorial Director of Black Book, figures 15 million is the natural "unincentivized" SAAR. That might even be optimistic based on current lending parameters. Consumer rebates help cover negative equity, making a car deal "buyable" to lenders. Without those rebates, a lot fewer vehicles would be sold absent a change in lender requirements.

But Painter doesn't seem to be against rebates and incentives. He just wants the consumer to know exactly what they are. That way, all that has to be negotiated is the "margin."

My suggestion to Mr. Painter is that is really should stop being so theoretical. Why not just buy a dealership, operate it your way, and prove to the rest of us that you are right? Disclose your triple net costs and negotiate the margin and see how that works. You know, put your money where your mouth is.

on Dec 28, 2013

As I hit the send button another thought occurred to me. The OEMs would love a 20 million unit year as their profits are made when they sell vehicles to dealers. Dealers, on the other hand, are in a different situation. Huge sales volume without appropriate gross profit isn't a winning strategy. People like Scott Painter fail to understand, it isn't about the car sale, its about the gross profit. There's no better way to learn that than through putting your own money up and buying a real dealership.

on Dec 31, 2013

20 million seems farfetched. And not just because of affordability. Even if fine china cost of the same as paper plates you wouldn't throw away after one use.

20 million new sales would, by necessity, force a large number of used, but useable, vehicles out of this country. (The growth rate of vehicles in operation has, and will, slow.)

The economics of the used vehicle export market (as well as country politics) preclude it from becomiing large enough to handle that flow.

We already have a situation where the engineering life of a vehicle exceeds it economic life. 20 million new sales per year would make that much worse.

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Blogs about automotive retailing, commenting on news impacting the business of selling vehicles.

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Steve Finlay

Steve Finlay is the editor of WardsAuto Dealer Business magazine. His journalism career started 40 years ago as a crime reporter. A Michigan native, he likes fast cars, big lakes and cold days.

Jim Ziegler

Jim Ziegler, president of Ziegler Supersystems, is a trainer, commentator and public speaker on dealership issues.
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