Saturday, November 22, 2008

Edmunds Detects Evidence of Pent Up Demand for New Cars and Trucks

Falling gasoline prices and near-record incentives may have consumers ready to buy cars again, according to the auto information site Consumers’ intentions to purchase a vehicle have risen 16 percent -- 23 percent for Big 3 vehicles -- since the presidential election Nov. 4, compared with the same period in October, said.

Edmunds, which reviews and compares new and used vehicles, monitors actions on its Web site that routinely precede a consumer purchase by six weeks or less. The company reports that data as “car purchase intent.”

Purchase intent usually remains flat during the first half of November, the company said.

“Our ailing industry can interpret these numbers to mean that there is some degree of buoyancy moving into the end of the year,” CEO Jeremy Anwyl said in a statement.

Tumble at the pump

Falling gasoline prices and increasing incentives are fueling that buoyancy, analyst Jesse Toprak said in an interview.

For instance, today Ford Motor Co. announced employee pricing for most of its models until Jan. 5, along with cash rebates and 0 percent financing for some vehicles.

General Motors began its annual Red Tag sale a few weeks early -- on Nov. 4. GM is offering prices close to those paid by employees of it suppliers -- with thousands of dollars of cash on top of that for some vehicles.

And today’s AAA national fuel price average is $2.07 a gallon for regular unleaded gasoline, down from $3.83 in mid-September. In some markets, gasoline is selling for less than $2 a gallon.

“There are potentially hundreds of thousands of potential car buyers waiting on the sidelines for some sign of civilization,” Toprak said. “High levels of incentive spending, combined with low gas prices, created an opportunity for consumers who had been waiting on the sidelines to buy.”

Purchase intent has grown steadily since mid-October, nearly back to pre-sales-plunge levels in early September, analyst David Tompkins said in a statement.

Hitting bottom?

Since unit sales usually drop 2 to 5 percent from October to November, the United States unlikely will see sales rise this month, Toprak said. is predicting roughly an 800,000-unit November, he said.

But the purchase-intent data indicate that the month-to-month drop should start stabilizing. And purchase intent appears to have bottomed out, Toprak said.

After Americans bought nearly 1,250,000 autos in August, U.S. auto sales fell below 1 million units in September, down nearly 23 percent from August and more than a quarter from the previous September. Sales fell to about 839,000 units in October, a decrease of 13 percent from the previous month and nearly 32 percent from October 2007.

An 800,000-unit November would be a 4.6 percent decrease from October sales.

Written by Chrissie Thompson and published by Automotive News on November 19, 2008

PRINTED FROM: - Entire contents ©2008 Crain Communications, Inc.

Editor's Note:
With the American fleet of vehicles in use at the oldest average age since such records were tracked, and the preponderonce of new and more fuel efficient product, combined with prices, incentives and financing terms better than any time since 9/11... It would seem that our industry is poised to make a heck of a comeback. However, if all that pent up demand were to be suddenly unleashed, given the dealership employee layoffs, the scaling back of dealer inventories... What would happen? What COULD we do as an industry if demand levels approaching 17M SARS were to kick in? At this point, with all the cuts and layoffs, I am not sure the dealer network as a whole would be prepared to deal with such demand.

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