What's the Worst Case? Look for Good-Size Drop
The U.S. automotive market is considered mature, but that doesn't mean it can't grow by another million units or so. Based on a trend analysis by Ward's beginning with 1960, annual U.S. sales should surpass the 18 million mark some time in the latter half of the decade. But the data also indicate a good-size drop possibly to around 15 million units is likely, as well. The first two years (2000-2001)
![WardsAuto logo WardsAuto logo](https://eu-images.contentstack.com/v3/assets/blt7121b6ec5c11097b/blt45f10b537a75bb26/65d72d47647c28040affd46b/Generic_image_WA.png?width=1280&auto=webp&quality=95&format=jpg&disable=upscale)
The U.S. automotive market is considered mature, but that doesn't mean it can't grow by another million units or so.
Based on a trend analysis by Ward's beginning with 1960, annual U.S. sales should surpass the 18 million mark some time in the latter half of the decade. But the data also indicate a good-size drop — possibly to around 15 million units — is likely, as well.
The first two years (2000-2001) of the new millennium averaged about 17.2 million, so anything above 18 million would mean close to another 1 million vehicles up for grabs.
Industry executives already are starting to take notice of the potential trend. Honda Motor Co. Ltd. recently cited the expanding North American market as a rationale for its plans to increase capacity in the U.S. and Canada.
General Motors Corp. is predicting 1% annual growth in demand going forward. “I wouldn't be surprised to see sales in the 18 million-unit range by the end of the decade,” says Paul Ballew, GM executive director-market and industry analysis.
But the bigger question is whether the industry will be able to handle a market plunge to as low as 15 million units after its present run of four (or more) 16 million-plus sales years.
On the plus side, the gap between the high and low sales years has continued to narrow with each successive decade. That means the industry can expect more stability. But even taking into account the flattening of the economic cycles, the trend suggests that some time between 2000 and 2009, light-vehicle sales should drop to about 15 million units.
The Ward's analysis also points to the decade of 2000-2009 averaging 16.7 million new car and truck sales per year, a big leap over 1990-1999's 14.5 million. After the two 17 million-plus years of 2000-2001, sales will have to average below 16.6 million for the next eight years for the decade to hit the projected 16.7 million trend line. Should any year finish above that — especially if it's close to 18 million units — an even bigger offset at the low end is likely.
Worse still is the timing. In each decade — including back to the 1950s — the low year has come in the first half. This could be the decade that breaks tradition because of the huge incentives of the last two-and-a-half years that effectively lowered new vehicle prices and possibly pulled ahead sales. If that's been enough to upset the pattern, then the decade's bottom may come later.
It's possible, though, that the trough will occur in the first half and fall only to the 16 million-plus range.
In each of the previous decades back to the 1950s, the lowest year always was connected to a precipitous decline in economic growth. Right now, the consensus economic outlook calls for no such declines in the next few years. If that turns out to be the case, 2002 — currently running at a 16.7 million rate — could be the decade's weakest year.
But if consumer confidence continues to decline, business investment remains cold or the housing market slows, then 2003, or maybe 2004, could make for an interesting, if not depressing, year for the U.S. auto industry.
About the Author
You May Also Like