• Rise in auto sales and production bottlenecks expected

    Automobile sales in the U.S. will return to pre-recession peaks within five years. At the same time, OEMs will face production and supply chain bottlenecks trying to meet this predicted surge in demand, according to a report from consulting firm A.T. Kearney
    May 23, 2011
    3 min read

    Automobile sales in the U.S. will return to pre-recession peaks within five years. At the same time, OEMs will face production and supply chain bottlenecks trying to meet this predicted surge in demand, according to a report from consulting firm A.T. Kearney.

    The firm expects 13.2 million new autos to be sold in the U.S. this year, surging to about 16 million units by 2013. A.T. Kearney believes this increase is largely due to pent-up demand for replacement vehicles, as the average vehicle age is now 10.4 years. In the group’s estimation, this demand is equal to 32 million units, of which more than 9 million will materialize in the new vehicle market over the next five to seven years, with the remaining 23 million units occurring in the used-car market.

    The study cautions, however, that the availability of financing, total cost of ownership and the unfolding events in Japan will impact vehicle sales in both markets. In the case of Japan, the aftermath of the earthquake and tsunami has created parts shortages that will affect 2011 U.S. new vehicle sales by 200,000 units.

    Dan Cheng, partner and leader of A.T. Kearney's automotive practice, said the sharp rise in gasoline prices over the past year, along with the weakened U.S. dollar, will continue to have an impact on consumer purchasing decisions.

    “Since 1996, gas-price fluctuations have explained more than 72% of the volatility seen in new small car sales,” he said. “One way for OEMs to navigate this uncertainty is to develop the capability to ‘flex production’ in terms of vehicle size. [That means] OEMs will have to respond rapidly to shifting customer demand. Those that have a flexible manufacturing capability and a responsive supply base will win the day.”

    Cheng added that this also means OEMs must be more proactive in managing supply capacity risks. “OEMs have a good understanding of the risks associated with their first-tier suppliers, but are focused primarily upon financial and operational risks,” he said. “They also only have a limited understanding of the lower tiers as supply-base monitoring is being delegated at each level of the supply chain, often to smaller suppliers who lack the resources to monitor risk properly.”

    A.T. Kearny’s research also found that over a third of the study's supplier participants said their capacity was below the requirements of the OEMs, and that access to capital was a significant issue for suppliers with annual revenues of less than $100 million.

    Voice your opinion!

    To join the conversation, and become an exclusive member of FleetOwner, create an account today!

    Sign up for our free eNewsletters

    Latest from Operations

    4126654 | Phartisan | Dreamstime.com
    driver retention
    Turnover and its causes are expenses we like to ignore or accept as the cost of running a trucking company. In a market like today’s, investing in retention doesn’t mean spending...
    Brakebush Transportation
    Brakebush Transportation was awarded the 2025 FleetOwner Private Fleet of the Year Award, sponsored by Descartes, for midsize operations.
    Members Only
    Leaders of Brakebush Transportation, a century-old family business, share some of their innovative strategies and deep commitments to drivers that earned their operation FleetOwner...
    Schneider
    schneider 90th anniversary
    Schneider hosted an anniversary event, honoring a legacy that began in 1935 and grew to 12,500 trucks today.