Driving Today

Is a Better Year Coming?

The auto industry braces for a year that many predict could be very challenging.

What will 2012 bring? A presidential election and all that accompanies it. A new baseball season with Albert Pujols wearing a Los Angeles Angels uniform. A slew of new vehicle introductions. But what will it bring for the auto industry and the individual car buyer? That’s a question that is vexing analysts around the world, because volatility is the word of the day … maybe of the year.

For clues on 2012, let’s look at 2011: If we consider the year-over-year comparisons with 2010, auto sales this year look pretty good. And that’s what the general media is reporting. Cars sales are up more than 8 percent versus last year, and light truck sales are up more than 10 percent. So things must be good and getting better, right?

Well, getting better, yes. But good? Not so much. When all is said and done, 2011 light-vehicle sales will exceed those in 2010, but 2010 was a no-growth, high unemployment year. So though 2011 will turn out somewhat better than 2010, it will not prompt many to go out and buy a new car. Employment and savings are still too iffy. Home values are still in a very depressed state.

But doesn’t the increase in auto sales in November indicate that the consumer is finally ready to come out of her cocoon and start buying again? Not necessarily. What is most troubling in this supposedly post-Great Recession era is that the Great Recession seems to linger on … and on … and on. Unemployment is still dreadfully high at 9 percent; despite reasonably optimistic early holiday sales, consumer confidence is at a low ebb. Many auto analysts share the pessimism regarding next year, because there are a lot of negative signs on the horizon.

In light of the ongoing economic malaise -- reflected principally in continued high unemployment plus diminished home values -- and the real possibility of an economic meltdown in the Euro zone, that pessimism seems utterly rational. Though the seasonally adjusted auto sales rate topped 13 million in November, few are predicting that U.S. auto sales will exceed 13 million next year. To put that in perspective, at the beginning of the decade, the annual sales rate was around 17 million.

Somehow, we have lost 5 million sales a year, and the auto industry has lost all the revenue that would be derived from those sales. That means less research and development money in an era in which research and development are more critical than ever. For the consumer, this means fewer choices and a slower pace of technological improvements.

These are the questions confronting us as we enter 2012: Are we in the first few years of what will be a no-growth decade? Will unemployment linger above the 8 percent level for years to come? Will fewer people buy new cars than in the year 2000? Some would answer yes to all three, but others believe most Americans embrace growth and economic progress; in fact, they feel as if it is their birthright. With that spirit ready to break out, this decade might end up far brighter than it has begun.



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