Automotive sales expected to continue accelerating, economists say

According to the more than 70 economists and analysts from business, academia, and government who participated in the Chicago Fed's 20th annual Automotive Outlook Symposium, held May 30-31, 2013, at its Detroit branch, the nation's economic growth is forecast to be solid this year and to strengthen somewhat in 2014. Light-vehicle sales are expected to rise to 15.3 million units this year and then improve to 15.8 million units next year.

C. Jenny Lin, senior economist, Ford Motor Co., presented the sales outlook for new vehicles (new cars and light trucks, as well as medium- and heavy-duty trucks). She said that global new-vehicle sales growth is expected to continue this upward trend, reaching a record high of 80 to 85 million units in 2013. Focusing on the U.S., Lin predicted new-vehicle sales to surpass 15 million units this year after having bottomed out at 10.6 million units in 2009.

Kenny Vieth, partner, Americas Commercial Transportation (ACT) Research Co., delivered the outlook on commercial vehicles (medium- and heavy-duty trucks). He noted that while heavy-duty truck sales are forecast to decrease from 278,700 units in 2012 to 262,300 units in 2013, they are expected to surge to 300,900 units in 2014; medium-duty truck sales are projected to grow from 188,400 units in 2012 to 197,600 units in 2013 and 213,700 units in 2014.

David Andrea, senior vice president, Original Equipment Suppliers Association (OESA), presented the outlook on the auto parts supplier industry, noting that supplier sentiment has become more positive in recent months. According to Andrea, because North American light vehicle production is expected to ramp up to 16.7 million units by 2015, suppliers have been looking into making long-term investments, such as new equipment purchases, and hiring more workers.

Over the past few years, suppliers have often lacked the confidence to do so and have instead focused on keeping their operations lean and disciplined while still meeting the rising demand for auto parts. Andrea noted that North American production of light vehicles has almost doubled from an annualized rate of 8 million units in September 2009 to more than 15 million units in January 2013, while U.S. auto parts manufacturing employment has increased only from about 400,000 to 500,000 over the same period. However, Andrea said that to support the 16.7 million units projected for 2015, suppliers will have to significantly increase their capital expenditures and workforce from current levels.