Light Vehicle Sales Expected to Rebound in 2002

Automotive Industries,  March, 2001  by Lora J. Bingham

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After a modest one-year dip, light vehicle sales will return to near-record levels

Despite the current doom-and-gloom vehicle sales climate, the overall outlook for damestic light vehicle sales (including cars, pickups, SUVs and minivans) is positive, according to a study performed by the CIT Group, a Livingston, N.J., based commercial finance and investment company.

CIT's 3rd Annual Light Vehicle Outlook notes that 2000 sales finished at an estimated 17.5 million unit record, eclipsing 1999's record of 16.8 million units. Only a modest drop to 16.63 million units is projected for 2001. The Outlook states that a slow, steady rise in vehicle demand per household and declining interest rates will cushion the negative aspects of the economy's expected "soft landing." Sales should rebound to just over 17 million units in 2002.

"For the most part, drivers, especially women, feel they will be safer in a truck, be it in bad weather or in a collision," comments Michael Paslawskyi, CIT vice president of economic research. "America's continued fascination with light trucks appears to be firmly entrenched."

More importantly, truck sales are expected to eclipse car sales for the first time in 2001, with 8,34 million units projected for trucks vs. 8.28 million units for cars. The trend should continue in 2002, with truck sales reaching a record 8.83 million units, while car sales slip to 8.20 million units.

Imported car sales are expected to pick up again in 20002 to an estimated 1.94 million units, and imported light truck sales will exceed on emillion units.

Other factors could also affect projected sales numbers. For example, the proposal to raise the CAFE standards for light trucks, now exempt from the 20.7 mpg standard that applies to cars, will be hard to meet due to the popularity of large pickups, SUVs and minivans.

Forecast sales numbers are based on the assumption that a recession will be avoided in the next two years; however, they account for a "growth recession," that is, real GDP expanding but unemployment rising. Thus, vehicle sales will decline in 2001 and then improve once better economic conditions are realized in 2002.

Import sales are also on the rise. Light vehicle sales reached 2.79 million units in 2000, the highest level in 10 years. Of those 2.79 million units, 1.97 million were light trucks. Projections for 2001 show sales of imported cars falling slightly to 1.89 million units and light truck sales growing to 890,0000 units. Why the divergent performance? "Many of the imported truck are 'hot' models at the moment, while many imported cars are in a more mature stage of their product cycle," explains Paslawskyi.

Establishment of a national rollover rating could also affect sales numbers, though it is believed that there will be a re-ordering of model popularity, but no change in overall light truck demand.

                 Import Share of U.S. Light Vehicle Sales
1995      12.9
1996      11.3
1997      12.8
1998      13.0
1999      14.7
2000 [*]  15.9
2001 [**] 16.7
2002 [**] 17.3
(*.)Estimate
(**.)Forecast
Source: The CIT Group

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