Global auto sales forecast rosy, with reservations, for 2014
By Bernie Woodall and Laurence Frost
DETROIT (Reuters) - Automakers are upbeat about global auto sales this year despite fears of a slowdown in the United States, which generates big profits and where sales have surged 50 percent since the recession.
Europe is expected to begin bouncing back from its 20-year lows and China, the world's largest auto market, will likely continue to post double-digit gains, helped by an array of stimulus measures and robust demand in smaller inland cities. But slowing demand in the second-largest auto market, the United States, has some analysts worried incentives could rise and bit into profit margins.
"You could see some pressure on the quality of profits," Hans-Werner Kaas, senior partner at McKinsey's automotive practice, said of the U.S. market. He is worried automakers will lose the pricing discipline they have shown since the low-point of the recession in 2009, when General Motors Co (GM.N: Quote) and Chrysler Group FIA.MI filed for bankruptcy protection.
Worldwide, auto sales in 2014 are seen rising 3.4 percent, according to research firm IHS, while LMC Automotive sees an increase of 5 percent. Talk of sales and the challenges ahead will be a topic of conversation among executives at the Detroit auto show this week.
In the U.S. market, analysts expect sales to land somewhere between 16 million and 16.5 million, near pre-recessionary levels, which would mean an increase of as much as 5.8 percent. In the decade before the recession began in 2008, the U.S. market averaged 16.7 million new-vehicle sales annually.
While sales could rise as much as 5.8 percent in the United States this year, that would be down from 7.6 percent growth last year and about half the double-digit gains in the three prior years as the market rebounded from 2009's lows.
"We're out of the restructuring phase and out of the riding the normal recovery growth and I think sometime at the end of 2014, or somewhere in 2015 — the growth from the 10 plus million cars in the U.S. to somewhere between 16 and 17 will be gone," said Xavier Mosquet, senior partner and managing director at Boston Consulting Group.
As growth slows, there will be more pressure on all players in the U.S. market to lower prices and raise incentives to keep up sales, which could hit company profits. Continued...