I'm an optimistic guy and I'm always trying to find some positive indications that the auto industry is in a position for some sort of recovery, no matter how minor. I've sifted through a bunch of pretty dry data on the internet over the last several days. My findings do indicate to me that better times may be near.
First off, it appears that manufacturers, especially the Japanese, understand that to stabilize they must downsize temporarily. The days of annual sales of 16 million new cars is currently a distant memory. If manufactures are told to look at 11 million units being sold in 2009, they might make themselves lean enough to survive.
There are no plus numbers to report, but a down January is actually showing some positive signs. The month's demand of 2.56 million in-market shoppers was the highest in 11 months and down only 5% from January 2008 when new mid-size car launches drove industry demand higher. The year-over-year decline in January 2009 was the lowest in 11 months. But if this is the first sign of a demand recovery it is in its very early stages given that this was the lowest January demand level on record. In any case, a slowing of year-over-year decline may at least suggest we're near the bottom or have finally hit it.
What does all this mean for 2009? Well, just as the 2008 demand decline preceded the sales implosion, does the modest resurgence in demand we're seeing now mean relief is on the way? It may be. Some analysis I have read suggest that if the demand trend as weak as it is continues, and if automakers find the right tools to turn shoppers into buyers, it is quite possible that new car sales will begin to recover in the second quarter of the year. Obviously that makes May sales figures pivotal.
But to produce a recovery a lot of pieces of the puzzle have to fall into place. Demand, currently running over 1 million shoppers below historic highs, needs to fully recover before sales can really take off. If demand holds stable at January 2009's 2.56 million shoppers, the industry would have to convert nearly 45% of those shoppers into buyers each month to reach 13 million unit sales for the year, the same as 2008. That's an ambitious target, one that would likely require a continued reliance on incentives to entice potential buyers into showrooms.
I hope that didn't make your hair hurt.