Southfield— U.S. auto sales climbed 13 percent last year and another 8 percent during the first eight months of 2013, but some industry analysts warn that the growth rate will slow as annual sales reach 16 million.
Brian Collie, vice president of consulting firm Booz & Co., said during an automotive panel Monday evening that the auto industry is typically a small-growth industry — with annual gains of about 1 or 2 percent — and that after the industry reaches 16 million or 16.5 million, the growth rate is likely to level off.
And if it doesn’t — and if annual sales climb to 18, 19 or 20 million — that could signal that some of the big sales gains have been propped up by external factors like low interest rates and not necessarily product or good economic fundamentals.
“That’s when you can start to be concerned,” Collie said. “Because that’s artificial demand.”
Interest rates on new-vehicle loans remain historically low, which has some concerned that recent sales gains aren’t driven necessarily by new product and technology innovation, but because credit is cheap.
Mike Jackson, CEO of AutoNation, the largest automotive retailer in the U.S., said even if interest rates normalize — rates should rise as the Federal Reserve “tapers,” or lowers the amount of monthly bond purchases — it should not hurt auto sales.
“The first part of recovery is simply the healing of credit. But I think the idea that we need zero percent interest to sell cars is not correct,” Jackson said. “We could see a normalization of interest rates and still be selling 15.5, 16.5 million units.”
New-vehicle sales haven’t topped 16 million since 2007, before the auto industry crisis. But at the current pace, 2013 sales could top that total.
“In many ways you’re getting back to a relatively solid, robust level of demand,” said General Motors Co. CFO Dan Ammann.
Source: detroitnews.com
