Don’t Take The Auto Recovery For Granted

Despite pretty rosy predictions for car-related TV ad sales in 2013, an auto industry analyst says the business is not rebounding like it should.

“The truth is that auto sales … are actually worse than they would have been in a typical bad recession,” says Itay Michaeli, Citi Investment Research’s VP of U.S. autos.

Americans bought about 14.2 million car this year, a number that is expected to rise only slightly, if at all, by the end of the year, he says.

Even during bad recessions, about 7% of drivers typically buy cars each year, Michaeli says. If that were the case this year, dealers would have moved 15 million cars off the lot already, he says.

Forecasters expect about 14.5 million car sales in 2013.

Michaeli gave broadcasters, who rely heavily on auto-related ad sales, his take on the industry Wednesday as part of the TVB Forward conference in New York. Earlier in the day, media analysts forecast auto-related TV ad sales to increase by about 8% next year.

Michaeli said a major factor hurting car sales is a change in consumers’ attitudes that has reduced the average number of cars drivers own. Currently, drivers each own an average of 1.15 vehicles, down from a high of 1.18 in 2007.

Although that decline seems small, it actually has a huge impact on the car industry — especially since it is a lifestyle trend that may stick regardless of the economy, he says.

It’s not uncommon for drivers who reduce the number of cars they own during tough economic times to keep that number low even when things turn around, he says. In addition, young drivers are not buying cars at the same rate that older drivers are getting rid them, he says.

“Our last few surveys show that Americans are planning to have fewer vehicles per household in two years,” Michaeli says. “That’s a bad sign.” Waning consumer confidence, and therefore spending, is another major factor, he says.

Michaeli says it is up to car companies to ease consumers’ concerns through special measures. A recent Hyundai program under which the car company agreed to buy back any car whose owner loses a job is an ideal example, he says.

“Complacency is the biggest risk today to this industry,” he warns. “Our message is that the recovery should not be taken for granted. It’s not a matter of when. It’s a matter of if.”