Last week, J.D. Power & Associates auto experts held its yearly conference to buff the crystal ball a bit and lay out the current scenario. To lead off, Jeff Schuster, SVP forecasting at JDP research division LMC auto, said that the way things are going, the market is heading toward 7% growth this year notching, 15.5 million units.
"When you look across at what's driving growth, a big part of it is the economy — though it's moving somewhat sideways." He noted that credit availability is good, fleet sales are down 17% this year, and the truck market — a huge chunk of U.S. vehicle sales — is strong both because of a brisk housing market and new products with premium amenities and content. Those vehicles, he said, are attracting not just commercial buyers, but a new crop of people who aren't buying trucks merely as workhorses. There is also a 21% increase in non-premium CUVs, he said, with high demand grabbing over 21% of market share.
Thomas King, senior director of of analytics and pricing who oversees the U.S. market and retail consulting for the firm, agreed that while retail demand is growing, "what is truly outstanding are transition prices [what consumers actually pay], which is up $3,000 from 2009. When you put the two things together, consumer spending is the highest on record. If auto manufacturers have 10% share, that's $4 billion into the coffers."
He said a lot of sales are coming from Gen Y buyers, who now constitute 36% of the market for cars and trucks. "When you look at it, it's a remarkable change in composition." He also pointed out that what used to drive sales of somewhat younger consumers was subprime offers. He said that while subprime sales have gone from 10% to 16%, "it's but not even close to 20% back in 2007. It's a healthy level; even at 16%, it's half a million fewer subprime sales than back in 2007."
There's also a change in what younger consumers are buying, with 45% of sales in sub-compact and compact. "It's up a lot based on new smaller cars with great engineering, features and
content. They are not buying large cars." He added that Boomers, however, are also more loyal, with 56% coming back versus 42% of Gen Y.
"Everyone's getting higher loyalty," he said. "Conquest rates from domestic to Japanese are down, and everyone's doing a better job of holding onto their customers. The domestics are no longer the low-hanging fruit in terms of things that need to be fixed in terms of gaps in product portfolio and in product. That has been fixed. Now everyone has great products. Loyalty is great, so it's really about conquest now.”