NADA Chief Economist Raises Auto Sales Forecast, As Industry Outlook Improves

MCLEAN, Va., Oct. 9, 2003 -- The chief economist of the National Automobile Dealers Association (NADA), Paul Taylor, Ph.D., has raised his annual automobile sales projection to 16.6 million new vehicles, from 16.3 million early this year, on the strength of an improved industry outlook.

"A strong summer selling season, improving economy and completion of major combat operations in Iraq are favorable signs that auto sales are likely to finish the year somewhat higher than expected," said Dr. Taylor. "Robust consumer incentives for 2004 models are also part of the brighter sales picture."

"This year will mark the fifth straight year of sales above 16 million units -- a remarkable accomplishment in a three-year period of economic and global uncertainty," he added.

Taylor pointed out that "Crossover" Sport Utility Vehicles, or CUVs, continue to be a key source of strength in the auto retail market. CUVs, which have a unitized car platform, have led sales growth among all vehicles this year, up over 37 percent year-to-date.

"Consumers are responding to the convenience, space, all-weather capacity and higher fuel mileage that CUVs offer," he said, projecting growth in that market for the rest of the decade.

Sales of CUVs were up 78 percent in 2000, 87 percent in 2001, 23 percent in 2002, and will likely climb another 40 percent this year, according to Taylor.

Sales of traditional truck-based SUVs were up 1.3 percent in September over a year earlier, as many people continue to choose true off-road vehicles with towing capacity. "Consumers are making a strong statement that they like their choice of an SUV, despite the many assaults on these vehicles by various special interest groups," he said.

However, he added that CUV sales will likely overtake truck-based SUV purchases within the next five years, as many new and innovative CUV designs will be coming to market, sustaining overall light vehicle growth.

"What we're finding is that U.S. consumers buy vehicles that meet their needs," said Taylor. "They take all the costs of operation of the vehicle into account and make a practical selection for their needs."

Taylor forecasts that 2004 sales will exceed this year's projected 16.6 million total, if manufacturers continue to price vehicles for high-volume sales. Sales above 16.7 million units are likely for 2004, even with interest rates increasing over the next several years.

"Low prices for vehicles will result from continuing intense competition among automakers worldwide, as well as increasing retail competition and efficiency among the 20,000 franchised new car dealers in the U.S.," he said. "Consumers will continue to benefit from these market forces and the product values that result."

The National Automobile Dealers Association represents more than 19,800 new car and truck dealers with nearly 43,000 separate franchises, both domestic and import.