Analysts’ 2010 Auto Sales Forecasts Come with Caveats

Most automakers will be happy to bid farewell to 2009. It has been a bumpy ride for most and has left even the most experienced industry analysts reeling. As they formulate their 2010 forecasts, many industry watchers are exercising extreme caution.

For 2009, U.S. sales of light vehicles will finish at around 10.3 million units. Chief economist Sean McAlinden of the Center for Automotive Research headquartered in Ann Arbor, Michigan predicts sales to inch upward in 2010 to around 11 million units. CSM worldwide forecaster Michael Robinet offers only a slightly more optimistic outlook. He expects U.S. sales to reach 11.8 million next year.

Both agree that the actual numbers could be considerably higher or lower depending on a number of factors. They also warn that automakers and automotive suppliers must be prepared for either eventuality.

According to Robinet, 2010 holds the potential for three “trip wires” that he says could trigger a crash. The three potential stumbling blocks are a deepening of the housing crisis, a double-dip recession and a slide in consumer credit. On the flip-side, he predicts that further improvement in consumer confidence or a second government stimulus program could send auto sales soaring past their projected levels.

McAlinden sees 2010 U.S. auto sales potentially reaching as high as 13.5 million units or stalling out as low as 8.5 million units, depending on broader economic factors.

McAlinden muses, “Will it be a good V, a bad L or a really ugly W?” Analysts assign a V-shaped pattern to situations in which sales rebound at approximately the same rate at which they fell. In such a scenario, U.S. auto sales could rebound to between 12.5 million and 13.5 million units in 2010. The L-shaped pattern is one in which sales fall to a low level and remain relatively stable. The L-shaped scenario would mean that auto sales would remain at approximately their current levels throughout the next year. The final scenario, the “really ugly W” would mean a sales environment that includes “bad financing, a crushed U.S. dollar, falling asset prices and rising unemployment.” In such a scenario, McAlinden says automaker may struggle to sell between 8.5 and 9 million units.

Neither McAlinden nor Robinet expect to see domestic auto sales reach the average 16.9 million units sold between 1999 and 2007 anytime soon.

Robinet predicts that it may be 2015 before we see annual U.S. auto sales reach 16 million units, but he says that price increases and the slower rate of growth in household incomes will more than offset predicted population growth.

McAlinden’s long-range outlook is less optimistic. He predicts that annual sales will not exceed 16.2 million units in the U.S. until 2020. “There’s a permanent change to a lower sales level,” he says. Of the 16 million annual U.S. sales average automakers enjoyed from 1999 to 2007, he says, “It really was a bubble.”

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