Industry Optimistic, While U.S. Drivers Keep Cars Longer

January 18th, 2012

Volkswagen assembly line

After some pretty disastrous years, the auto industry is crowing with expectations of growth in 2012. Sales are up, and thousands of jobs are reportedly in the offing.

At the same time, a just-published analysis by Polk reveals that U.S. drivers are keeping their cars longer and longer. The average age for cars and light trucks is now 10.8 years.

Is there some contradiction here? Not really, since neither Polk nor the automakers expect the trend of driving older, high-mileage cars to continue rising. That is, a lot of pent-up demand for new cars has been building since 2008.

Another factor driving new-car sales is an improved product. The industry is making some of its best (and longest-lasting) products ever, cars like the 2013 Ford Fusion.

Last year, U.S. car sales were 12.8 million, up 10.3 percent over 2010. This year, the car chiefs are talking 13.8 million and doing some chest-thumping, like Mercedes-Benz USA CEO Steve Cannon:

For every one customer that leaves and migrates to Lexus, four migrate from Lexus and come to us.

Peter Pan BMW, frontMore hubris from BMW’s North America boss Ludwig Willisch:

We don’t produce trucks, nor taxis or buses. We don’t produce sofas on wheels—and we don’t take mass-market vehicles and rebadge them as premium.

Take that, schweinhund kompetitors!

These happy/feisty predictions assume that the economy will continue improving, even as Europe’s remains very shaky. Car prices keep rising, and the main reason people can anticipate buying a new car is low-interest financing. Which equals more debt, of course, against generally stagnant wages.

So I come down on the side of caution in the face of all the industry hoopla. Yes, the immediate outlook is good, and no, there are still many glitches lurking in the software.

Do you think the auto industry can sell 13.8 million cars in the U.S., as predicted, this year?

—jgoods

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Used Ford Fusion

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  1. panayoti
    January 20th, 2012 at 00:02 | #1

    @ Randy
    How about a Prius C ?. Under $20k, 50mpg, 500 mile range and for a Prius, not too bad looking. Out March 12

  2. Randy
    January 19th, 2012 at 19:24 | #2

    I’m in the market for a plug-in or full electric that will take care of about 90% of my trips if it has a 40 mile range. But I’m sure not going to pay $35,000 for one.

  3. Randy
    January 19th, 2012 at 11:59 | #3

    I think you’ll continue to see an inverse relationship between unemployment levels and new car sales. Unemployed people don’t buy new cars and families that are underemployed don’t either. I think the only thing that will really spur new sales is gas hitting $5 a gallon this summer, but on the flip side that will likely hurt the economy and jobs enough to reverse the gain. I’d say there’s a 50-50 chance sales will actually go down.

  4. panayoti
    January 18th, 2012 at 16:39 | #4

    I think so. Used car prices are still high and that part is bothersome but could in itself help spur new car sales. We have scads of new and better cars coming out every day and they are very affordable and I think that bodes well for new car sales. Another possible downside is the bothersome trend of increased sales of big, gas hog SUVs. Since I am a believer that gasoline prices will rise this year, the newer more efficient engines they are putting out along with sophisticated transmissions could prove to be a counterintuitive positive in the sale of these newer models. I will purchase a new car again this year and am leaning to the new Mazda CX-5 with improved transmission and engine redesign and GOOD mileage, the new small Subaru Crosstrek, and ugh, can you believe it, the new Prius C if I can fit in it. What do they all have in common? Good gas mileage. If others believe that gas prices will rise this year, the auto industry will be prepared and sales should improve that 14 million figure.

  1. January 24th, 2012 at 05:02 | #1