Home/Blog/Trading Ideas/As Recovery Quickens, New Car Sales Increase

As Recovery Quickens, New Car Sales Increase

25 January 2013 in Trading Ideas

The phrase “a huge bright spot” isn’t one normally associated with something in the current American economy. But that is what one Standard and Poor’s analyst called new auto sales, one of the most important indicators of the country’s overall economic direction.

Car dealer associations from across the country are near-unanimous in reporting net positive sales for 2012. The figures are all over the map, from a 2.9% increase in Buffalo, NY to a whopping 27% increase in San Diego.

“We don’t see a return to the financial doldrums of the recent past,” said James Davlin, treasurer at General Motors, in a presentation earlier this month.

Industry analysts say that 2013 could see the sale of as many as 16 million new cars. That would represent a double-digit increase from 2012, when 14.5 million new vehicles left the lot.

That New Car Smell motif targets this very trend. It includes not only the big automakers, but also suppliers of auto parts and related components, all of which could benefit if more consumers swap their old car keys for new ones.

There certainly are plenty of choices available: Jeff Schuster, Senior Vice President of LMC Automotive, an industry analyst group in Troy, MI, says that 61 new or redesigned models will be for sale this year, up 50% from 2012.

Should new car sales for 2013 reach the 16 million figure, it would be one indicator suggesting that the economy is close to having completely recovered from the 2008 financial meltdown. The decade before that was the high point for the U.S. auto industry, when, during a typical year, between 16 million and 17 million were sold.

One of the underlying trends that bodes well for new car sales is a statistic known to analysts as “car density,” or the number of cars per household. Currently, the United States has 975 cars for every 1,000 licensed drivers; there are seven million fewer cars on the road than in 2007, the year before the crash.

Total car counts have decreased even though population has increased simply because many households gave up a second car during the tough times. In fact, for several years after the crash, the number of cars sent to the junkyard exceeded the number of new cars that were sold.

Analysts say the decline in car density was most severe in 2010, but that the figure has been slowly improving since then.

Another indicator of rising sales in the near future: The average car on the road is now 11 years old, which is also the average age at which U.S. residents tend to replace their cars.

Investing in securities involves risks, you should be aware of prior to making an investment decision, including the possible loss of principal. Examples provided are for informational purposed only and are not intended to be representative of a recommendation for a particular investment or strategy. Motif makes no representation regarding the value or suitability of a particular investment and whether an investment may be right for you. You are responsible for all investment decisions you make based on your own unique objectives and tolerance for risk. For detailed information on how we calculate returns, please visit www.motifinvesting.com.

  1. Johnd437
    21 Jul at 11:59 am

    Hello. excellent job. I did not expect this. This is a great story. Thanks! decbbeddcdkd