DETROIT (Dec. 13, 2010)—Figure on a slow and steady recovery in U.S. auto sales next year—a rise of about 10 percent, according to the consensus of analysts surveyed by Automotive News.
But one outlier predicts a much bigger jump in 2011 and offers some compelling data to back it up.
The consensus is for 2011 volume of 12.7 million sales, a 10 percent increase if this year ends at 11.5 million units. All but one of the seven analysts predicted a market of 12.5 to 12.9 million.
But Morgan Stanley says consumer creditworthiness is improving so rapidly that lenders are about to loosen credit dramatically—and that will rocket the market to 14 million units in 2011.
“The catalyst is credit availability— a bigger impediment to auto sales than tight inventories or low demand,” says Ravi Shanker, Morgan Stanley's lead analyst for North America.
Morgan Stanley is far from other forecasters on 2011, but less so after that. In 2012, Morgan Stanley sees 15 million sales. IHS Automotive predicts 14.8 million, which is close to the others.
“Everybody gets to the same place,” Shanker says. “We just get there faster.”
Analysts simply don't agree on whether auto sales will recover as fast as they fell. So far sales have not snapped back, and most analysts say we won't get a V-shaped recovery. But Shanker thinks otherwise, citing Morgan Stanley proprietary indices of credit quality and availability.
“Credit quality and availability always move in lockstep, with availability trailing quality by three months,” he said. “Now credit quality is rising quickly and is near historic highs. Even a small change in lender attitude means more auto loans and more affordable terms.”
But too many fundamental economic factors are weak for one improvement to break the logjam, counters senior analyst George Magliano of IHS Automotive. Jobs, housing and credit are all huge drags on auto sales.
“There will be no massive surge in the short term,” he said.
Magliano says there could even be a first-half dip before sales improve in the second half.
Jesse Toprak, vice president of industry trends for TrueCar.com, said this crisis is different from previous auto sales slumps and recoveries.
“This recovery has been slower than ones we have seen in other industries, and it will stay that way,” he said.
“The auto industry needs time to recover from a decade of overproducing and selling on the deal instead of the merits of the vehicle.”
Brightening a bit, Toprak said auto makers have not reverted to overproducing and excessive incentives to grab market share because they have fresh memories of where they went too far.
Dan Montague, senior analyst at PricewaterhouseCoopers Automotive Institute, is the most pessimistic of those surveyed, forecasting a market of 12.5 million for 2011.
“We still have a good bit of downside risk, perhaps as low as 12 million,” he said. “I just don't see an environment healthy enough to put the car buyer back in the game.”