Automotive sales correlate highly with consumer confidence, which will continue to improve as consumers strengthen finances and reduce household debt. Banks are also more willing to extend favorable credit terms, increasing consumers’ ability to purchase big ticket items. Auto loan originations increased to $92 billion in 2013, the highest since 2007. Coupled with an expanding population, favorable demographics and new vehicle lineups, these trends bolster long-term growth expectations.
At the same time, the rate of increase will decline as pent-up demand tapers off and industry sales approach the long-term historical average. The industry is expected to launch 41 products in 2014, up from 20 in 2013, which could outpace expectations.
“Despite a slow and uneven recovery, recent indications demonstrate that U.S. consumers are willing to spend on big ticket items,” said Tristan Balcer, author of the report and automotive analyst at Euler Hermes. “Many auto companies restructured their operations during the Great Recession of 2009. As such, the industry landscape has changed significantly, resulting in a leaner, more efficient sector that is poised to seize current opportunities.”
The age of the U.S. light vehicle fleet is at a record high of 11.4 years, which Euler Hermes expects will boost growth and aftermarket demand for both original equipment manufacturers (OEM) and auto parts suppliers. Both will also continue to benefit from restructuring and cost-cutting initiatives, resulting in a more profitable and stable future.
While rapid increases in gas costs could also push consumers toward smaller, more fuel-efficient vehicles, improved truck mileage and a rebounding housing sector will support the product balance between trucks and cars.