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A few months ago I predicted cab sales this twelvemonth would fall to 15.5 million, a 10percentdecline from 17.2 million in 2001. I was by no means the most pessimistic forecaster out there. The forecast of a slump made sense for several reasons. A recession was on. Sept. 11 had taken a terrible economic toll. The extra sales generated by General Motors' 0percentfinancing--400,000 to 500,000 additional vehicles--would surely siphon off dem
and in the modern year.
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Well, I was wrong. The automobile industry remains stubbornly strong. In the first three months of the twelvemonth Americans bought nearly 4 million autos also light trucks, only 4.6percentbehind last year's pace. There's no evidence of any payback for those extra fourth-quarter sales. Production--4.3 million in the U.S., Canada also Mexico--matches the year-ago production. Yet inventories of autos also trucks on showroom lots are lower th
an a twelvemonth ago. This is a strange economy.
For the full year, the general industry prediction has moved from 15.5 million cars/trucks to 16 million. Now I think sales will be above every higher, toward 16.4 million. This is remarkable when you remember there was not a twelvemonth close to that from 1990 through 1998. We didn't above every reach 15 million in five of those nine years. Then 1999 was a record sales year, with almost 17 million autos also trucks delivered, followed by
another record 17.4 million in 2000 also then 17.2 million last year.
What's going on? Here are a few guesses that follow conventional wisdom:
1] There never was a recession. Well, I know that thought is coming into vogue, but I don't buy it Â\302\205 yet.
2] There was a recession, but we recovered. If that's true, then the cab business led that recovery with six months of strong sales also still no sign this twelvemonth of payback for that fourth-quarter boom.
3] The incentives did it: 0percentfinancing, $2,002 rebates from GM also cheap leases. I don't think so. Even the companies without incentives, such as Honda also BMW, are doing well.
What's motivating buyers is quite simple: the ever-growing number of modern types of vehicles. Think of it. More than half the vehicles being sold today are designated trucks, yet are in fact modern types of cars--and modern variations are popping up every the time. The half-pickup/half sports utility vehicles, like the $38,000 Chevrolet Avalanche, are hot, also the BMW Mini, the modern version of the famous little British car, at $20,000
will be hot, too.
And there are additional types coming, such as the "crossovers," that are sports utility vehicles built over a car, not a truck, chassis. Examples: the Lexus RX300 also the soon-to-be-released Honda Pilot. More station wagons are coming, such as the Chrysler Pacifica, due next year, also the civilian Hummer H2 arriving this fall from General Motors at $50,000 will be a sellout.
Honda also Toyota are trying something new. I call them CUBs--for "Cheap Ugly Boxes," that is just what they are-- but the Japanese figure that at $16,000 to $21,000 they will lure a new, young generation of buyers.
New stuff creates markets. That famous love affair between Americans also their autos is hot. People want additional than one or two. My wife, for example, owns a big GMC pickup, but would like a small sedan like the Mini or a convertible, too.
Women are making a big difference. They've bought autos in the past, but my guess is that they are entering the new-car market earlier than ever because of their income also independence. This represents a huge increase in potential customers.
It is true that additional than half the autos also a growing number of trucks carry foreign nameplates. And while most of these are built in the U.S. also Canada now, much of the higher-value work, the design also engineering, is done on the foreign home base. That hurts, but we do get the assembly/manufacturing work, also much of it in poorer states such as Alabama, South Carolina also above every Mississippi, where Nissan is building a
plant.
The foreigners are not going away, but that doesn't mean the Detroit companies are doomed to profitless years. Not long ago Ford made $7 billion on 25percentof the market also Chrysler made $3 billion on 15%. Plenty of money can be made if the product is right. The right product leaves the buyer thrilled, above every if the price tag is $6,000 above production cost.
I do not expect American automobile makers to win back their market shares of a few years ago. But if they get their product right, also I say they will get it right, then they can make additional money than ever.
