NADA’S TAYLOR: NEW-CAR SALES WILL HIT 16.8M IN ’04

NADA’s Taylor delivers the numbers.

February 1, 2004—Growth in the new-car sales market this year will be moderate compared with the peak of 2000, NADA chief economist Paul Taylor said today. “It’s going to be difficult to replicate the past several years in the next several years.” Still, new-vehicles will reach 16.8 million this year, said Taylor.

Automakers will try to move new products with few or no incentives, while those on existing Big Three products will be more than $3,000 (versus $3,700 in 2003). Taylor said dealers are expecting interest rates to rise, too, and he predicts the Federal Reserve Board could raise them as early as November, but definitely in 2005.

Dealership expenses will continue to rise, said Taylor. Demand for local TV ad spots will increase through this election year as candidates air political ads. Last year, dealers’ heating, power, and lighting expenses leaped 14 percent; employee expenses, including health care, jumped 8 percent; rent, 7 percent; and data processing, 5 percent. Taylor estimates that dealer profits will fall by one-tenth of 1 percent from last year, standing at 2 percent to 2.1 percent.

Dealers who’ve been making changes to their operations—such as adding quick-lube lanes and online service appointment scheduling—will reap benefits as the back end will be integral to profits. “You have to capture the customer for a longer period of time,” says Taylor.

One of Detroit’s ongoing key concerns the past few years has been dollar-to-euro and dollar-to-yen differences, because of their effect on product development and pricing. And added production capacity in China will keep worldwide new-vehicle availability above demand—not a good thing for automakers’ bottom lines, but a boon for car buyers.

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