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Dealers expect steady growth

Bright spots tempered with worry over economy

Automakers sold the most vehicles in five years in 2012, but the future isn’t as bright as it would seem, critics say.

U.S. sales last year zoomed to 14.5 million – a 13 percent bump from 2011. Forecasters expect showrooms to be busy in coming months as consumers look to spend income tax refunds, unemployment eases and the economy continues its turnaround.

Still, auto expert Sean McAlinden says “happy days” are far from here again. For the auto industry, happy days would be 2005, when sales reached a peak of about 17 million vehicles.

As always, the economy and consumer confidence – which despite gains is still fragile – will dictate auto sales, McAlinden said. He is executive vice president of research and chief economist at the Center for Automotive Research, a nonprofit institute in Ann Arbor, Mich.

McAlinden has conducted research for the U.S. Department of Commerce, the Library of Congress and other entities. In his spare time, he provides expert testimony to legislative bodies.

“We’re forecasting very modest growth over the next five years,” McAlinden said. “By 2017, they still won’t have reached the peak of 2005, and that’s even with a larger population.”

New-vehicle sales result in a $350 billion annual business, compared with the $550 billion used car industry.

One reason for the disparity besides cost is vehicles are built better so they last longer, McAlinden said.

The average auto is 11 years old. Used-car lots will continue to benefit from consumers seeking reliable pre-owned transportation.

“That’s what I’m looking for,” said Brian Heath, a 51-year-old electronics technician from Fort Wayne. Heath said he’s ready to ditch his 1991 Chevy Corsica for a SUV.

“I’ll probably get a Jeep (Cherokee). I can afford it now. My kids are grown up.”

Heath said he’s aiming to spend $10,000 to $12,000. The average used car price is about $17,000, while a new vehicle’s average cost is $31,000, according to the National Automotive Dealers Association website.

“I don’t have much confidence in the economy,” Heath said.

But some do. In 2012, consumers pushed Volkswagen sales 35 percent higher than a year earlier with more than 470,000 vehicles. Dana Furthmiller, general sales manager of Vorderman Volkswagen of Fort Wayne, admits that last year was an anomaly.

“It was the first time we had the Passat produced domestically at our plant in Chattanooga (Tenn.),” he said. “Dealers were in short supply before that, but when it’s produced right here, it’s more readily available.”

Even so, auto industry analysts believe the Passat’s redesign is likely to continue to drive sales for Volkswagen.

The same goes for Toyota’s Camry, McAlinden said.

“People just sat back and waited” for Toyota’s recall and inventory issues to be resolved “and then they went out and bought cars,” McAlinden said.

Russ Crumback of Crumback-Symons Chevrolet in New Haven said GM has responded to buyers’ desire for new models and is competing with its foreign counterparts. The Chevy Cruze compact and Equinox SUV are popular sellers.

“The pent-up demand is still there,” Crumback said of consumers sitting on the fence. “(The industry) has a long way to go to catch up to where we were in 2005, if we ever do.”

Such frankness is shrewd.

Michael Hicks is associate professor of economics at Ball State University and director of the school’s Center for Business and Economic Research. He said the next few years won’t result in a slew of carbuyers.

“People will hold onto their cars longer,” Hicks said. “Sales will increase modestly, but it won’t be this crazy explosion.”

At a glance

Here’s a U.S. automotive sales forecast:
2013…15.1 million
2014…15.3 million
2015…15.4 million
2016…15.5 million
2017…15.7 million
Source: Center for Automotive Research

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