NADA CHIEF ECONOMIST FORECASTS 16.5 MILLION NEW-CAR SALES

NADA’s Taylor gives traditional convention forecast.

February 4, 2007—NADA chief economist Paul Taylor today predicted a steady-as-you-go market for new cars and trucks in 2007, as interest rates remain flat and unemployment rates stay in the 4.6 to 4.9 percent range.

Taylor noted that dealers remain optimistic for better sales as the manufacturers strive for more retail sales at the expense of fleet sales in an economy that continues to show low inflation and steady growth of 2.5 percent.

At the same time, Taylor forecasted a consumer confidence rating of 110.3, which he called robust.

Taylor also sees larger gains for used-car sales by new-car dealers, as a constant flow of some 130,000 workers enter the force each month. Based on affordability levels, it bodes well for used-car and service profit centers, he noted. Taylor predicted a year-over-year growth in franchised dealers’ used-cars sales of 100,000, bringing the total in the range of 12.3 million units for 2007.

Taylor discussed a number of changes to the market environment:
• Crossovers continue to climb as large SUVs decline, driven mostly by sensitivity to gas prices.
• Both China and India will likely enter the U.S. market sooner than later.
• Hybrid sales will continue to grow as more products enter the market, but face a tougher road as tax benefits and HOV lane access go away.
• Four-cylinder powertrains will continue a pattern of growth they’ve seen over the last several years.
• As financial assets continue trending upward, luxury car sales should continue to come improve.
• Fewer dealers will continue to sell more vehicles as low-volume rural dealership numbers further shrink and suburban dealer numbers grow.