Does the Sales Boom Have to End?

Now that it looks like a sure thing that we're going to hit an all-time sales peak of 17 million vehicles this year in the U.S., I can already hear the doomsayers lining up to predict this is the beginning of the end for the great boom we've enjoyed since the early 1990s.

Currently most analysts and economists still are upbeat about 2000 and the next four years, predicting sales of 16 million units or more. But I know there are folks out there just dying to finish drawing a bell curve, with sales rising strongly in the early '90s, peaking in '99 and then dropping steadily for the next four or five years.

They have been predicting a downturn for years now and, gosh darn it, they want it to happen.

They want it to happen because that's the way the auto industry has always been - at least for the past three decades. Sales rise early in the decade, peak in the middle and then fall off again. They want the '90s to fit the same pattern. They'll just say the peak came three or four years late.

And they want it to happen because some of these prognosticators just can't deal with change.

Others have a decidedly puritanical tone, where nothing enjoyable can go unpunished: no sex without guilt and no sales peak without a following recession.

Others take a Newtonian perspective. Gravity applies to all things, even the desire to buy a new car or truck. Sales have to fall because "What goes up must come down."

They want that up-down sales cycle. They need that cycle. What will they do if they can't define automotive as a cyclical industry?

Chris Cedergren, an automotive analyst at Thousand Oaks, CA-based Nextrend, who focuses on future product trends - and who makes it clear he's no economist - has an interesting theory. He says many economists - and even automakers - are befuddled by the continuing strength of automotive sales because their econometric models don't take into account the fact that consumer buying patterns have changed.

Mr. Cedergren points out that most of today's car buyers didn't suffer through the Great Depression, and they don't suddenly stop buying vehicles and start stuffing money under their mattress every time there's a little bit of bad economic news.

Baby Boomers spend far more freely and lavishly than their parents, and Boomer children are even more fearless and self-indulgent spenders, he says.

The popular perception of these younger consumers is that, because they've spent so much of their lives in good economic times they aren't concerned about saving money or how much credit card debt they have, and they aren't worried about losing their jobs. After all, if they lose their job, they'll just get another one with better pay, right?

"They're not programmed to sacrifice or cut back on spending," argues Mr. Cedergren. That's the stereotype, at least.

I really can't picture a twenty-something web site development manager stroking his goatee thoughtfully and saying, "Hmmm, Alan Greenspan is raising interest rates another quarter point, guess I better postpone my Nissan Xterra purchase."

However Diane C. Swonk, chief economist at Bank One Corp. in Chicago, throws a little cold water on that theory. She says good economists base car sales predictions on a lot more than mere econometric models, and she adds that they are aware that people spend differently when unemployment is 4% rather than 8%. Right now she's predicting 16.1 million light vehicle sales in 2000, but she says it would not be impossible to hit 17 million again.

I must admit I'm one of those pessimistic sorts who comes from the "this can't go on forever" school of auto sales predictions. While I don't believe we have to be punished for good sales, I am concerned by all the credit card debt consumers are piling up, and the record number of bankruptcies that are occurring even while unemployment remains at some of the lowest levels ever. But I have been predicting slower sales for about three years running now, along with many fellow nattering nabobs of negativism. I'm tired of being wrong.

I would not be surprised at all if we hit 17 million sales again in 2000 for one simple reason: There are some really great vehicles coming next year. To name only three, there's the DaimlerChrysler PT Cruiser, the Ford Explorer Sport Trac and the Chevrolet Silverado with an incredibly durable composite pickup box. These vehicles are different, they are innovative, practical and will be reasonably priced. There are dozens of other models out there that are so desirable and expressive that I think people will make big sacrifices to own them. Plus automakers have plenty of dough to slather on juicy incentives if they need to.

As I say, I'm usually a big pessimist, but not this model year.