America's automotive industry continues to boom, with analysts predicting that sales in 2014 will reach over 16 million units while marking just the second time since World War II that the industry has seen five consecutive years of growth. The estimates, if correct, would represent a 500,000-unit improvement over the current projections for 2013.
What's remarkable, though, is how the industry is achieving this growth. Two things set this boom apart from the last time we saw five consecutive years of growth, 1996 to 2000. First, it's the vehicles being sold. In those halcyon days of cheap gas and cheaper interiors, the Detroit Three were shifting record numbers of trucks and SUVs while the humble car languished. The industry also offered heavy incentives to move metal and keep supplies at appropriate levels. An over-reliance on fleet sales also artificially inflated sales figures.
Industry watchers say this boom is very different, though. Big-name market segments are swelling with contenders that are better than they've ever been before. The Detroit Three are genuinely competitive in the midsize and compact sedan segment and are maintaining dominance over the fullsize pickup truck market, while Japanese control is also being challenged by a pair of able-bodied Korean brands.
Vehicle prices, rather than incentives, are increasing, while fleet sales have been trimmed dramatically. "You see a rising level of competitiveness for the domestics across the whole industry, which is forcing the Asians to be more aggressive just to maintain where they are," said Tom Libby, an RL Polk analyst that spoke with Automotive News. George Magliano, Chief Economist at IHS Automotive, meanwhile, told AN the growth was "coming effortlessly."
The industry is facing issues that may cause problems in the future, however. In some cases, vehicle supplies are extremely low due to the booming demand (not to mention the fallout from automakers' drive to reduce production capacity during the crisis). This is part of the reason prices are climbing so quickly – manufacturers need to perform a difficult balancing act between maintaining availability without flooding the market and pushing down prices. There's also concern over growing sub-prime loans, for reasons that shouldn't need explaining. But despite these worries, the market is more competitive than it's ever been, and while prices may be high, the competition appears to be nothing but good news for consumers.
What's remarkable, though, is how the industry is achieving this growth. Two things set this boom apart from the last time we saw five consecutive years of growth, 1996 to 2000. First, it's the vehicles being sold. In those halcyon days of cheap gas and cheaper interiors, the Detroit Three were shifting record numbers of trucks and SUVs while the humble car languished. The industry also offered heavy incentives to move metal and keep supplies at appropriate levels. An over-reliance on fleet sales also artificially inflated sales figures.
Industry watchers say this boom is very different, though. Big-name market segments are swelling with contenders that are better than they've ever been before. The Detroit Three are genuinely competitive in the midsize and compact sedan segment and are maintaining dominance over the fullsize pickup truck market, while Japanese control is also being challenged by a pair of able-bodied Korean brands.
Vehicle prices, rather than incentives, are increasing, while fleet sales have been trimmed dramatically. "You see a rising level of competitiveness for the domestics across the whole industry, which is forcing the Asians to be more aggressive just to maintain where they are," said Tom Libby, an RL Polk analyst that spoke with Automotive News. George Magliano, Chief Economist at IHS Automotive, meanwhile, told AN the growth was "coming effortlessly."
The industry is facing issues that may cause problems in the future, however. In some cases, vehicle supplies are extremely low due to the booming demand (not to mention the fallout from automakers' drive to reduce production capacity during the crisis). This is part of the reason prices are climbing so quickly – manufacturers need to perform a difficult balancing act between maintaining availability without flooding the market and pushing down prices. There's also concern over growing sub-prime loans, for reasons that shouldn't need explaining. But despite these worries, the market is more competitive than it's ever been, and while prices may be high, the competition appears to be nothing but good news for consumers.
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