RESEARCH ANALYSIS
Vehicle Sales Slide to a 20-Year LowNORTHVILLE, MI (Aug. 22, 2007) - The deepening downturn in new housing starts, combined with soaring consumer debt triggered by rising adjustable rate mortgages (ARMs), will continue to put the brakes on U.S. light vehicle sales through the remainder of 2007, according to an analysis by automotive market forecasting firm CSM Worldwide. The sluggish demand for automobiles will recover no sooner than the fourth quarter of 2008, the research firm says, as market fundamentals have deteriorated and will need at least a year to rebuild. At a recent CSM Insider Series briefing for suppliers and auto supplier executives, company analysts reaffirmed their prediction that with consumer budgets stretched to the breaking point as a result of the mortgage crunch, sales will be dragged down to 16.2 million units this year - 350,000 fewer vehicles than in 2006, the lowest annual sales level since 1998. CSM said that auto sales historically correlate closely to housing starts, which were down 26 percent for the first six months of 2007 compared to the same period a year ago. July was down a further 6 percent, to the lowest level in more than 10 years. "We looked at data going back to 1970, and it's remarkable how closely light vehicle sales mirror housing sales, particularly new housing starts," says Charles Chesbrough, CSM senior economist. He also notes that overall consumer debt is up 13 percent over the past five years, and mortgage debt has soared 23 percent during that period: "Consumers who opted for ARMs to get into homes they otherwise couldn't afford now find themselves stretched beyond their means. "With many consumers having a harder time getting mortgages or coping with higher payments from their ARMs, there will be a considerable impact on light vehicle sales," Chesbrough adds. "Weak sales of existing homes and declining home values also are dampening consumer spending, leaving less money available for vehicle purchases." CSM also reported that North American light vehicle (truck) production is expected to fall to 15.1 million for 2007, down from just over 15.3 million a year ago. Most of the downturn occurs at GM, down 9.5 percent, and Ford, down 6.1 percent. Despite lower overall production, CSM said that several OEMs will boost production, including Chrysler by 3.8 percent, Toyota 7.7 percent, Honda 3.4 percent and Nissan 4.4 percent. On a positive note, CSM noted that the fast-growing crossover segment, which has enjoyed a sales surge of 82 percent over the past five years, will grow another 78 percent by 2013, largely at the expense of traditional body-on-frame SUVs. The crossover market already is as large as the traditional SUV market during the truck boom of the late 1990s, CSM said. The firm also predicts that sales of small cars and luxury vehicles will continue to grow at a healthy clip.(Source: CSM Worldwide)
Vehicle Sales Slide to a 20-Year LowNORTHVILLE, MI (Aug. 22, 2007) - The deepening downturn in new housing starts, combined with soaring consumer debt triggered by rising adjustable rate mortgages (ARMs), will continue to put the brakes on U.S. light vehicle sales through the remainder of 2007, according to an analysis by automotive market forecasting firm CSM Worldwide. The sluggish demand for automobiles will recover no sooner than the fourth quarter of 2008, the research firm says, as market fundamentals have deteriorated and will need at least a year to rebuild. At a recent CSM Insider Series briefing for suppliers and auto supplier executives, company analysts reaffirmed their prediction that with consumer budgets stretched to the breaking point as a result of the mortgage crunch, sales will be dragged down to 16.2 million units this year - 350,000 fewer vehicles than in 2006, the lowest annual sales level since 1998. CSM said that auto sales historically correlate closely to housing starts, which were down 26 percent for the first six months of 2007 compared to the same period a year ago. July was down a further 6 percent, to the lowest level in more than 10 years. "We looked at data going back to 1970, and it's remarkable how closely light vehicle sales mirror housing sales, particularly new housing starts," says Charles Chesbrough, CSM senior economist. He also notes that overall consumer debt is up 13 percent over the past five years, and mortgage debt has soared 23 percent during that period: "Consumers who opted for ARMs to get into homes they otherwise couldn't afford now find themselves stretched beyond their means. "With many consumers having a harder time getting mortgages or coping with higher payments from their ARMs, there will be a considerable impact on light vehicle sales," Chesbrough adds. "Weak sales of existing homes and declining home values also are dampening consumer spending, leaving less money available for vehicle purchases." CSM also reported that North American light vehicle (truck) production is expected to fall to 15.1 million for 2007, down from just over 15.3 million a year ago. Most of the downturn occurs at GM, down 9.5 percent, and Ford, down 6.1 percent. Despite lower overall production, CSM said that several OEMs will boost production, including Chrysler by 3.8 percent, Toyota 7.7 percent, Honda 3.4 percent and Nissan 4.4 percent. On a positive note, CSM noted that the fast-growing crossover segment, which has enjoyed a sales surge of 82 percent over the past five years, will grow another 78 percent by 2013, largely at the expense of traditional body-on-frame SUVs. The crossover market already is as large as the traditional SUV market during the truck boom of the late 1990s, CSM said. The firm also predicts that sales of small cars and luxury vehicles will continue to grow at a healthy clip.(Source: CSM Worldwide)
