2005 industry forecast: analysts weigh in on what the automotive industry can expect from the new year

Automotive Industries, Nov, 2004 by John Peter

Though Ford and General Motors have scaled back vehicle production in the last quarter of 2004 to reduce some overcapacity, 2005 should produce sales volumes near or even a little bit higher than 2004. Strong sales predicted for the fourth quarter of 2004 should bring the final number near 16.8 million vehicles. Analysts are looking at a one to one-and-a-half percent increase in 2005.

"We'll see some pull ahead and because of that we're expecting the first quarter of '05 to be a struggle," says Joe Barker, manager, North American sales analysis at CSM Worldwide. "But after the first quarter, we're expecting the balance of the year to be a pretty good year."

The sales increase in 2005 will be fueled, not only by a strong fourth quarter in 2004, but also by a glut of new product coming to North American showrooms, as well as additional capacity from new manufacturing plants from Toyota in Texas and Hyundai in Alabama.

Pete Langlois of the Ernst & Young Center for Business Knowledge is a little less optimistic about sales for 2005. He says that while all the new product coming for '05 should help push sales up near the 17 million level he's concerned that while the U.S. economy showed greater GNP growth over the course of 2004 than it did in 2003, that auto sales remained flat even though the manufacturers were doling out record incentives.

"That worries me in the sense that we had great economic growth, we threw more money at people and yet we still, at best, are matching the sales level," Langlois says.

Langlois feels that the automakers are not seeing any sales growth because the strong growth in GNP hasn't translated into wage growth_

"I'm optimistic about next year," Langlois adds, "but until I see the wage growth improve, then sales will probably drop a little bit, to about 16.5."

Market Share

The Domestic Big 3 can expect a further erosion of its market share in 2005 due largely to the increased capacity from the new domestics.

"The next year we're projecting GM to be down to about 27 percent," Barker says. "That's down from 27.8 to 27.9 for this year."

Aside from the added new domestic capacity, Barker credits GM's drop in market share to the fewer number of new products, compared to the other domestic manufacturers.

"And you've got (Chew) Aveo underneath," says Michael Robinet, vice president, global forecasting services for CSM. "Cavalier cut a pretty wide swath. I think you're looking at slimming it up a bit."

"Also, you have to factor in that Oldsmobile is going away," Barker adds. "GM had Oldsmobile sales for a good portion of this year. They're going to lose that."

The new Chevrolet Cobalt, replacing the Cavalier in 2005 will not be the same high volume car that Cavalier was for GM because of an increasingly competitive small car market.

CSM is expecting a nominal decline for Ford Motor Company at 21.2 percent of the market, down about 0.7 percent from 2004. This may seem depressing for a company who's launching a new flagship sedan in the Ford Five Hundred as well as a new Freestyle crossover.

"Nice vehicles," Langlois says, "yet people aren't terribly excited about them."

DaimlerChrysler is predicted to post market share at 14.2 percent, down 0.3 percent from 2004. Strong sales of the new Chrysler 300 sedan actually pushed market share up in 2004 and the company is hoping that the excitement can continue with the release of the Charger in 2005. Langlois also points out that while Dodge's truck fleet is aging, it's still putting up some good sales numbers.

On the transplant side, 2005 could prove to be a down year for Toyota, coming off of a stellar year led by a new Sienna minivan and increased production of the RX330 SUV in North America. But with a lack of new product in the pipeline for 2005, the experts are things to slow down for the mighty Japanese import Barker expects market share in 2005 to be around 12.3 percent, down form 12.9 percent in 2004.

Langlois agrees. "Toyota's had a good year but it's not been coming necessarily from those bread and butter Corolla and Camry products," Langlois says. "So if sales are going to drop a little bit and the domestics are going to gain, then that's the place they're going to take it out

Honda will have a new Odyssey minivan for 2005 that will really push the envelope in volume, according to Barker. Along with that and the new Fit small car, Barker sees Honda's share jumping from 8.3 percent in 2004 to 8.7 percent in 2005.

"Honda is certainly looking for a halo effect from the Accord hybrid," says Langlois. "And I guess the other exciting thing from them is the small pickup. I'm not terribly sold on how well that's going to do. I don't know how it draws a lot more people in the Honda brand that weren't already there."

"Nissan sales are up this year in North America by 34 percent through August," says Jeff Brodoski, manager North American forecasting for J.D. Power. "And that's because of its new vehicles, the Titan, QX56 and Armada as well as added capacity of Altima (in Canton)."