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Thu August 15, 2013
Auto Industry's Pent-Up Demand Expected To Ease Slowly
DAVID GREENE, HOST:
If economists looking at the housing sector are generally optimistic, those who follow the auto industry are practically brimming with glee. Right now, the average age of cars on the road is the oldest ever recorded, at 11-and-a-half years, which means at some time, people will have to buy newer ones. As NPR's Sonari Glinton reports, that time may be now.
SONARI GLINTON, BYLINE: To talk about cars, you have to talk first about housing. I know. We just finished with housing. But Gary Bradshaw, a portfolio manager with Hodges Capital Management, says there's a direct link between construction and the auto industry.
GARY BRADSHAW: You know, these construction workers are now working full time and, of course, they were driving 10-year-old pickup trucks that needed to be upgraded. Well, now that they're working and hauling more crews around to different job sites, you know, they're going out and they're having money in their pocket to buy new trucks.
GLINTON: Truck sales are up, and the big truck makers are banking on them to stay that way for a while. General Motors just introduced two new trucks, and Ford appears to be on the verge of revamping its F150. And that's partly because the truck fleet on the road is old, and so is the car fleet. Alec Gutierrez says part of what is keeping car and truck sales high is that so many people have delayed for so long.
ALEC GUTIERREZ: Through the downturn from 2008 through 2010 or '11 or so, we saw anywhere between five to seven million customers that decided to delay their purchase that are only now returning to the marketplace.
GLINTON: And Jeremy Acevedo with Edmonds.com says that the fact that cars are so old is a good thing. Cars are much more reliable and aging well, so he expects the pent-up demand to ease gradually.
JEREMY ACEVEDO: You don't really expect them to, all at once, you know, kind of storm the lots, like Cash for Clunkers. It's going to be definitely something done on consumers' own time this time. Now, that's definitely something that's going to lead to long-term sustainable growth.
GLINTON: Acevedo says consumers are much more discriminating, and when they go to purchase, they're being very selective.
MELINDA ZABRITSKY: They're paying on time. They're staying current. They're managing their debt.
GLINTON: Melinda Zabritsky with Experian Automotive, a subsidiary of the credit ratings agency, says vehicle repossessions are low, and so are auto loan delinquencies, but that's not all.
ZABRITSKY: Consumers are staying current on credit cards. They're staying more current on mortgage. So it seems today's consumer is doing a really good job of managing their debt obligation, whether it's auto or another type of loan.
GLINTON: All that is giving those who watch the auto industry reason to breathe a sigh of relief. Let's go back to Gary Bradshaw from Hodges Capital Management to take us home.
BRADSHAW: I think it is for real, and I'm placing my bets as a portfolio manager that it is for real, and I think we're in the third or fourth inning of this recovery.
GLINTON: Bradshaw says that's where he's putting his bets. And for that matter, so is the auto industry. Sonari Glinton, NPR News. Transcript provided by NPR, Copyright NPR.