NADAs Paul Taylor sees stiff competition ahead for auto sales

NADAs Paul Taylor sees stiff competition ahead for auto sales

Expect an auto industry shootout for the rest of the year as the competition gets serious, says Paul Taylor, chief economist for the National Automobile Dealers Association.

There will be knock-down, drag-out competition, because all of the automakers have good inventories, except for a couple with bottlenecks, Taylor said at the annual Center for Automotive Research Management Briefing Seminar in Traverse City, MI.

Taylor said dealers will have almost enough of everything in stock for the rest of the year and that gives bargaining power to consumers. That is in contrast to the first half of the year, when U.S. inventories were sparse, especially for Asian automakers still feeling the ill effects of natural disasters in the Northern Pacific part of the region in 2011, said Taylor.

Taylor said that the first half of 2012 was hard for some dealers, because you cant sell what you dont have, noting that there were a lot of inventory difficulties because of the earthquake and tsunami in Japan and the floods in Thailand, which, for example, took Hondas days supply from 33 a year ago to 44 in May to 53 in June, he noted.

Taylor said the auto industry is recovering faster than the national economy and that car sales will go over 14 million this year, but how far over is an unknown.

Hyundai and Kia sales in the U.S. would be higher this year were it not for capacity constraints in South Korea, Taylor said, noting that Subaru faces the same problem. But other automakers and their dealers have sufficient stocks. The inventory shortages are over and that means there will be more competition to get customers attention, he said.

Preventing an outright sales explosion are some stubborn economic negatives, however. Those include 8.3% unemployment, weak consumer confidence and a housing market that has not fully recovered, Taylor said.

Strong housing prices spur vehicle sales, he said. Housing prices were in a free-fall a few years ago. Now, prices have found a bottom in most states, although we are still seeing some difficulties west of the Rockies. But overall, prices were up 0.5% in the first quarter of 2012.

Auto sales will also be aided by easier credit and reasonable gasoline prices, Taylor noted. He said the midsize car segment will be the standout of 2012. We are seeing the strongest growth there, as households look for a vehicle that meets their needs and delivers good fuel economy.