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Auto Outlook: Pent-up demand keeps car sales from stalling

By AL SWANSON, UPI Auto Writer   |   Aug. 12, 2012 at 5:30 AM
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While auto industry watchers anticipate a slowdown in vehicle sales from the torrid pace of the first half of 2012, economists say sales will be good for years.

The reason: pent-up demand.

The average passenger car on U.S. roads is more than 11 years old and -- in a self-fulfilling prophecy -- as the economy improves, housing gradually recovers and consumer confidence grows, people will become more willing to invest hard-earned dollars in new, state-of-the-art, fuel-efficient vehicles to replace their thirsty old clunkers, analysts say.

"That is a gift that will start giving to the U.S. economy as we get into the '13, '14, '15 time frame, said Ford Motor Co. chief economist Ellen Hughes-Cromick at the Center for Automotive Research Management Briefing Seminars.

The National Automobile Dealers Association forecasts more than 14 million vehicles will be sold in the United States this year, while R.L. Polk, a respected auto data and marketing firm, predicts sales of 14.3 million jumping to 16 million by 2014, The Detroit News said.

Automakers sold 12.8 million cars and light trucks in the United States in 2011, a far cry from the record 17.4 million vehicles sold in pre-recession 2000.

"We're anticipating 12 percent growth between 2012 and 2014," Anthony Pratt, director of forecasting for the Americas for Polk, said. "We anticipate we'll actually realize the 16 million unit range as soon as 2014."

Responding to changing market conditions, Jim Lentz, head of Toyota Motor Sales USA, last week said the Japanese automaker would shift more production to North America because of the strong yen.

Toyota has recovered from the March 2011 earthquake and tsunami, and floods in Thailand, that curtailed production in Asia last year. Toyota sales are up 28.3 percent through July, but with the yen trading at slightly more than 78 to the dollar, currency fluctuations make it more expensive to build cars in Japan and ship them to North America than to make them in North America.

Lentz, in a speech, said Toyota would consider moving production of a vehicle with annual sales of at least 100,000 units a year out of Japan. Toyota already makes 70 percent of the vehicles it sells in North America in the region and this fall launches a new full-size Avalon, including a hybrid model, made for the North American market.

"With where the yen is today, I think it's only a matter of time," he said at a seminar at the Grand Traverse Resort in Acme, Mich. "The hedge against currency is to build cars where you sell them, so if you have the right amount of volume in a given series, it makes sense to consider that."

Toyota is on pace to sell nearly 2 million vehicles in the United States by year's end.

"We'll have additional announcements down the road as more of our cars are designed, built, sold and serviced right here in North America," Lentz said.

Lentz remains optimistic because there are fewer 1- to 5-year-old used cars around after the industry's dismal sales in 2009 and 2010, the Detroit Free Press said.

"That's what competes with new vehicle sales," he said. "I think that's why you're seeing such an escalation in used car prices. So it bodes very, very well for the future of new vehicle sales."

Toyota last week debuted a battery-powered crossover utility RAV4 EV in four California markets: San Francisco, Sacramento, San Diego and Los Angeles/Orange County. The plug-in electric was jointly developed with Tesla, which provides the electric motors, lithium-ion batteries, electronics and software, and will have a 103-mile range on a single charge.

The 4,032-pound RAV4 EV will have sticker price of $50,610 when it goes on sale in September. Volume will be kept low unless demand soars. Only about 2,600 RAV4 EVs will be available in the next three years.

Toyota warranties the battery for eight years or 100,000 miles.

Justin Ward, an engineer in charge of the advanced power train program at the Toyota Technical Center in Ann Arbor, Mich., predicts Toyota will have a fuel cell-powered sedan in the United States in three years.

The fuel cell vehicle most likely would be first sold in California, a state that hopes to have an infrastructure of 68 hydrogen fueling stations up and running by the end of 2015.

A fuel cell -- considered the holy grail by clean car advocates -- converts hydrogen and oxygen to electricity with only water, heat and nitrogen dioxide as byproducts.


U.S. to field test vehicle-to-vehicle communication

Later this month, the Transportation Department begins a year-long study to see whether electronic vehicle-to-vehicle communication can avoid crashes on 75 miles of roads around Ann Arbor, Mich.

GM, Ford, Toyota, Honda, Hyundai-Kia, Mercedes-Benz, Nissan and Volkswagen are participating in the pilot program for the National Highway Traffic Safety Administration, providing nearly 2,900 connected cars, trucks and buses.

The vehicles will test a number of safety systems including forward-crash alert, blind-spot detection, lane-change warning, do not pass warning and emergency brake light, The Detroit News said. The system allows the vehicles to communicate with one another, technology, NHTSA says, that potentially could reduce vehicle crashes by 80 percent among unimpaired drivers.

The federal safety agency is considering whether vehicle-to-vehicle communication should be required in new vehicles.

"We have a whole team at the Volpe National Transportation System Center doing an independent evaluation of the data that comes out of [the] safety pilot to generate what are some initial benefits, estimates of this technology and that will set up the agency's regulatory decision point in 2013," said Tim Johnson, NHTSA's director of crash avoidance and electronic controls research.

Daimler AG, the parent of Mercedes-Benz, smart and Maybach, is participating in a similar field study with 120 network enabled vehicles on public roads in and around Frankfurt, Germany, through the end of the year, The New York Times said.


Honda Accord redesign respects heritage

Honda showed the first pictures of its 2013 Accord last week and the ninth generation of the venerable Accord looks a lot like the old Accord.

The Japanese automaker didn't intend to shock family-sedan buyers who have kept the Accord a top-seller for decades but calls the 2013 model "the most sculpted Accord ever." The first Accord hit U.S. shores in 1976.

The 2013 model will offer new engines and a continuously variable transmission.

As usual, Honda engineers focused on finding more interior space for drivers, passengers and cargo while doing nothing radical to the exterior styling -- a formula that has worked well for mid-size rivals Camry and Altima.

The new Accord reaches showrooms this fall.


Another Saab story

As Saab is reborn as a maker of clean electric vehicles, Spyker NV, the Dutch automaker that bought it from General Motors in 2010, is suing GM, accusing the American auto giant of forcing the Swedish auto company into bankruptcy last year.

Spyker's lawsuit filed in Detroit seeks $3 billion in damages, The Wall Street Journal said. The Netherlands firm paid $74 million cash and $326 million in preferred shares for Saab, but GM retained rights to technology and patents used in Saab vehicles.

GM refused to give up that technology when Chinese investors offered to buy Saab after cash-flow problems forced a halt in production in March 2011.

"GM deliberately pushed Saab over the cliff," Spyker Chief Executive Officer Victor Muller said.

GM called the suit "completely without merit."

The majority of Saab's assets were later purchased by start-up National Electric Vehicle Sweden AB, jointly owned by National Modern Energy Holdings Ltd. of Hong Kong and Sun Investment LLC of Japan, in April.

The Chinese-Japanese partnership hopes to develop Saab electric vehicles for sale in China.

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