Debt, not disaster, is what threatens light vehicle sales

RSS

So I found myself leafing through a global light vehicle sales forecast the other day (I know; I should seek therapy – IMMEADIATELY) and found myself reading a very interesting conclusion: that national deficits pose a far greater threat to light vehicle sales than natural disasters at this point in time.

That at least is what consulting firm PricewaterhouseCoopers (PwC) determined as part of its Autofacts Global Light Vehicle Assembly forecast.

"One thing that the industry can never fully predict is the effect of a natural disaster," noted Brandon Mason, senior automotive analyst with PwC's Autofacts team. "However, we do not think it will have a significant impact on full-year sales, as minimal inventory was lost and the supply chain remains largely intact."

By contrast, the European Union remains the biggest area of concern from where PwC sits, as continued weak demand has resulted in painfully low utilization levels at some automakers – forcing the need for capacity rationalization in the near future. 

“The European debt crisis continues to prevent true global recovery within the sector [and] continues to weigh against truly realizing global economic recovery," explained Michael Gartside, senior automotive analyst with PwC's Autofacts division. "However, we expect assembly to stabilize within the region over the next year with growth returning mid-2013. This is on par for an overall recovery in the second half of the year and into 2014."

That being said, European light vehicle assembly operations are still expected to stabilize over the next year, the firm noted, reaching 15.7 million units in 2013 – an approximate increase of 100,000 units compared to 2012.

PwC noted that Japan is experiencing a significant assembly boost to recover lost inventory during the natural disasters of 2011 – specifically the frightening Tsunami that struck that island nation in March last year – but its long-term assembly outlook remains bleak. 

Autofacts forecasts 9.1 million units of assembly in the country for 2012, which represents peak volumes during the forecast window through 2018. Continued appreciation of the Yen, along with the overall trend of localization to manage geopolitical and supply chain risks, are expected to result in an accelerated assembly shift to current export markets, the firm said.

By contrast, PwC noted that its North America assembly forecast is for 15.3 million units in 2012, adding that North America will also benefit as a result of increased assembly localization from Europe and Japan as automakers look to minimize risk by expanding their global footprint.

The group's U.S. light vehicle sales forecast remains at 14.5 million units, driven largely by pent-up demand and increased availability of financing – all despite the impact that Hurricane Sandy had on purchases in October.

That’s remarkably close to LMC Automotive’s pre-Sandy outlook for total light-vehicle sales in the U.S., which hovers around 14.4 million units for 2012, with the firm’s prediction for 2013 remaining at 15 million total light-vehicle units, noted Jeff Schuster, LMC’s senior VP of forecasting.

"It is becoming clear that the U.S. automotive market is finally approaching a stage of a more natural level of demand, which has been accelerated by increasing consumer confidence and a need to replace aging vehicles," he said in a news release two weeks ago.

"This stability at a higher level is taking the edge off the risk factors for the remainder of 2012 and into 2013, as the U.S. economy wrestles with the European crisis,” Schuster added. “There is further upside potential for 2013 if the level of demand continues to outpace the risk factors post-election."

In terms of manufacturing, North American light-vehicle production volume is up 20% throughout the first three quarters of 2012 compared to the same period in 2011 and continues to be one of the U.S. economy's bright spots, he added.

Indeed, more than 1.9 million additional vehicles have been manufactured in 2012 through September, highlighting the progress achieved from last year's challenging production environment, Schuster noted.

That’s good stuff: let’s just hope that trend continues. 

Discuss this Blog Entry 3

on Jan 10, 2013

yes, and i agree in someways that Debt and not disaster is what threatens light vehicle sales so better acquire for the meantime or get more soundcloud plays

on Mar 11, 2013

What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?

Carl Mann

on Sep 19, 2013

I'm grateful for the article post. Fantastic keep on posting.
Buy Vine Trial

Please or Register to post comments.

What's Trucks at Work?

Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

Blog Archive

Sponsored Introduction Continue on to (or wait seconds) ×