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Global Auto Market Faces "Outright Collapse" in 2009

Sales recovery not expected until at least 2010

By Mark Huffman
ConsumerAffairs.com

October 10, 2008

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As the U.S. new-vehicle retail market continues to deteriorate, new-vehicle retail sales are projected to end 2008 at 10.8 million units, which is 2 million units below 2007 sales, according to J.D. Power and Associates. The situation could be even worse next year, the company warns.

Approximately two-thirds of the decline in retail sales—which are reflective of actual consumer behavior in the new-vehicle marketplace—can be attributed to consumers delaying vehicle purchases. On average, consumers are keeping their vehicles 4 months longer in 2008 compared with 2007—up from 67 months to 71 months. The remaining one-third of the volume decline comes from reduced leasing activity. Additionally, fleet sales are expected to decline to 2.8 million units in 2008, which is well below the 3.3 million unit level achieved in 2007.

"Buyers are both voluntarily and involuntarily exiting the U.S. new-vehicle market," said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates. "The additional decline in expected vehicle sales is a function of growing concerns around availability of credit and leasing, declines in vehicle equity and general economic stress."

The current turmoil and financial crisis adds risk to the 2008 forecast of up to 200,000 units, as it is unclear how consumers will respond in the fourth quarter, researchers said.

J.D. Power and Associates forecasts total new light-vehicle sales—which includes both retail and fleet sales—to drop to 13.6 million units in 2008, registering a 16 percent decline from 16.1 million units in 2007.

Market uncertainty has also led to a downward revision of the J.D. Power and Associates 2009 U.S. light-vehicle forecast. Total new light-vehicle sales are expected to drop to 13.2 million units in 2009, with the retail sales market declining to 10.6 million units.

"Falling trade-in equity, fewer leasing options, credit market restructuring and the increased migration to used vehicles are all putting added pressure on the U.S. new-vehicle sales market in 2009," said Schuster. "Any truly pronounced recovery appears to be more than 18 months away."

Slowing within the international automotive market is projected to intensify during the fourth quarter of 2008, and will likely lead to a downward revision for 2009, according to the research firm. Forecasts have been reduced for the Chinese, Indian and European markets, which automakers view as prime growth areas.

"While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse," said Schuster. "While mature markets are being impacted more severely than emerging markets, no country or region is completely immune to the turmoil."

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