A newly released study that looked into consumer behavior is predicting a slower recovery than other reports have suggested, pointing towards market normalization.Recent studies have suggested a bullish return to pre-crash levels of 16 million annual new car sales by 2013, but a new report suggests a much different path to recovery.
A study performed by Itay Michaeli, a Citi Investment Research auto analyst, used methods that included polling in five-month intervals since March 2010 with an outcome that suggests the market may continue a trend of scrapping old cars faster than it replaces them. According to Michaeli, for the first time ever, Americans are actually scrapping old vehicles faster than they are replacing them.
Michaeli's claims are backed up by research performed by R.L. Polk, which says 2.1 million more vehicles have been scrapped than purchased since 2008, as pointed out in a Detroit Free Press report. Michaeli explains that Americans began purchasing new cars at a higher rate than they could reasonably sustain as a result of the housing bubble given their limited funds tied up in mortgages and second mortgages. Now, the market is normalizing and consumers are trending backwards towards owning fewer vehicles.
The conclusion of Michaeli's study is that Americans will actually reach 14.6 million new vehicle sales by 2013, a full 1.5 million short of other projections that would put the U.S. industry at pre-2009 recession levels. "This severity of this flush was caused both by the deep economic downturn and the 'over-buy' that occurred since the 1990s, unquestionably aided by incentives and credit," said Michaeli.
to help illustrate his point, Michaeli demonstrated that Americans owned 1.18 vehicles per driver in 2006, which was considered the peak of the housing bubble, where as they are currently at 1.14 - a number he says is still high. The analyst believes that the number could fall as low as 1.04 to 1.08, which would yield his predicted sub-14.5 million vehicle number for 2013.
The survey used by Michaeli asked consumers a few questions, including how many vehicles their household held, how many they expect to own in two years and whether or not they will add or subtract from their current count. The result? Only 10 percent expected to add a vehicle, while 14 percent of the 2,700 respondents expected to move to fewer vehicles.
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