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NADA economist sees sustained sales growth in months ahead

January 7, 2011
By Ray Scarpelli Sr., Metro Chicago NADA Director
New-vehicle sales, a key indicator of economic growth, were strong in November and will continue to show signs of strength over the next couple of months, predicts Paul Taylor, NADA chief economist.
"Several economic factors, such as an aging U.S. fleet, strong trade-in values and an improving stock market, are helping to sustain new-vehicle sales," Taylor said.
On average, cars and trucks on the road today are more than 10 years old. Taylor said many consumers simply will feel the need to buy a new car or truck as the mileage on their current vehicles move beyond 120,000 miles.
According to data from the NADA Guide Book, the run-up in used-vehicle prices also is pushing some shoppers into the new-vehicle market. Wholesale prices in November continued to outperform seasonal expectations.
"The used-vehicle market will remain short of low-mileage cars and trucks, which for car owners will increase their trade-in equity when buying a new vehicle," Taylor said. "This is another key economic factor that will sustain new-vehicle sales increases in future months."
Strong used-vehicle pricing also has improved the market for automotive asset-backed securities – a positive sign, especially for this time of year, says Jonathan Banks, executive automotive analyst for the NADA Guide Book. "We expect to see an uptick in January as used prices follow seasonal patterns and supply and demand continues to create a healthy used-car market," Banks says.
In other legislative and regulatory news . . .
Members of Congress on both sides of the aisle expressed concern over an Obama administration proposal to add letter grades to the fuel-economy stickers displayed on new cars and trucks. In a letter to the Environmental Protection Agency and the Transportation Department in December, 53 House members said the proposal was biased toward electric vehicles and would hurt vehicle sales.
"Changing this system to a letter grade would cause consumer confusion and tip the scales unfairly against many fuel efficient SUVs and trucks, relegating them to a C or C+ grade," said Rep. Dale Kildee (D-Mich.).
Doug Greenhaus, the NADA’s director of Environment, Health and Safety, responded: "It is especially significant that so many members of the House Energy and Commerce Committee, which has jurisdiction over the EPA, object to the government creating another regulation when new-car buyers already have clear and visible fuel economy numbers printed on the window sticker." And in comments to the Administration, the NADA expressed its support for an approach that retains the current label’s focus on miles per gallon and annual fuel costs.
For plug-in labels, the NADA supports displaying information on all-electric and total-vehicle range and battery charge time, but opposes a kilowatt-per-hour consumption metric.
• The NADA Opposes Sale of E-15 ‘Gasohol’ and plans to submit comments this month to the EPA on its October decision to allow the sale of fuels with up to 15 percent ethanol. The NADA and several other organizations, including the Alliance of Automobile Manufacturers and the Association of International Automobile Manufacturers Inc., also oppose the move, saying allowing the sale of E-15 "gasohol" poses a risk of reduced engine and fuel system performance or, worse, permanent damage.
For several years, most light- and medium-duty gasoline-engine motor vehicles sold and serviced by dealerships have been designed to accommodate gasohol blends containing a maximum of 10 percent ethanol, with some duel- and flexible-fueled vehicles designed to use E-85, a gasohol blend containing 85 percent ethanol.
"The NADA consistently has raised concerns about the negative impact that unreasonable fuel mandates and poor fuel quality can have on vehicle performance and customer satisfaction," says the NADA’s Greenhaus. "The NADA opposes rules which may result in the use of fuels in engines for which they were not designed."
In other NADA news . . .
  • Advance registration for the 2011 NADA Convention & Expo in San Francisco is up 15 percent compared to the same time last year. All but two hotels have sold out, and the expo floor is full. "Participation in the NADA convention is often a bellwether for the overall health of the auto industry, and the brisk registration is just another sign the industry is making a comeback," says Jack Caldwell, chairman of the NADA’s convention committee.