Forecasters are cautiously optimistic about auto sales
US car buyers are more fussy and hard-nosed than ever before.
Unhappy with just basic transportation, they demand more quality, improved reliability, and increased value before they lay out the cash for a new car.
''They're shopping the market and looking for the best deal,'' says E.T. Pappert, head of domestic automotive sales for Chrysler Corporation.
It's all a bit confusing for the domestic carmakers, who are forced to make multibillion-dollar decisions, knowing that in an ''iffy'' market the decision may go bust.
Small cars are ''in'' when gas prices go up and the supply is in doubt, but when the price falls, new-car buyers once again think ''big.''
Fuel prices are 8 to 10 cents less now than they were a year ago. As a result , ''big cars were up 2 percentage points in the market in 1982,'' according to Mr. Pappert.
Taking a guess on '83, Pappert says the bulk of the market will still be in small cars, with the subcompact segment taking more than 30 percent, the small specialty segment 14 percent, and the compact segment 15 percent. The Chrysler sales executive sees the luxury and basic large segments together taking 16 percent of the market in '83.
But as before, this is strictly a guess, despite the marketing research and crystal-ball gazing of the experts.
To sell more cars, Ford Motor Company is probing the middle of the car market , where up to now it has had little impact. Also, it is putting heavy stress on its new ''aerodynamic look,'' as typified in the Ford Thunderbird, due out in mid-February, and the Ford Tempo, scheduled to be unveiled next May.
Looking to 1983, Ford chairman Philip Caldwell predicts a better auto market in 1983 than in '82 - but how much better is anyone's guess. Carmakers have crawled out on too many limbs in the past, only to see the limbs, and themselves , drop to the ground.
Why the guarded optimism?
Fuel prices have been moving down or staying even, car prices are flat or falling, and interest rates are down. At the same time, however, any recovery in the auto industry is directly tied to an overall improvement in the US economy. If the general economy remains flat, the automobile market is likely to stay soft, says Caldwell.
Louis E. Lataif, general manager of the Ford division, admits to being ''very bullish'' about the future, adding, however, that he isn't wishing for ''too much too fast.'' While he wouldn't go overboard for '83, he said he expects 1984 to be ''spectacular.''
Auto sales in October, despite the new '83 entries by US and some foreign carmakers, were running at a 7.6-million-unit seasonally adjusted annual rate, down significantly from September's 8.5-million-unit sales pace, according to the Chase Econometrics Auto Group. In reaction, automakers jumped in with a variety of dealer-incentive programs, buyer rebates, and low-interest credit programs, most of which run out today.
Most observers agree on forecasts for a slow upward move in car sales in 1983 . However, the slow-paced gains are tied directly to the anemic US economy, which continues to defer any meaningful upturn.
''Signs of economic recovery continue to be elusive,'' reports Otto Eckstein, chairman of Data Resources Inc., as reported in Automotive News, the trade weekly.
Roger Smith, General Motors chairman, appears as confused as everyone else about the outlook for 1983. The GM chief says an upturn is on the way, but he declines to predict just when it will show up.
One thing is clear, the sales-incentive programs of the industry have tended to mask any real recovery in auto sales, however slight. The repeated injection of car rebates into the mix has taught potential car buyers to wait for the best deal. When the interest-rate subsidies and rebates end today, only then can the real measure of consumer demand be plumbed.
James W. Ford, chairman of Ford Motor Credit Company, expects interest rates to continue to fall. If so, this ultimately will help car sales and do away with the need for pump priming.
''Recent declines in interest rates are not likely to be reversed in the near term,'' according to Chase Econometrics. The Federal Reserve Board has increased reserves and reduced the discount rate sharply in recent months, Chase continues , even though the basic money supply has exceeded the target range.
''The sharp decline in long-term rates in recent weeks is the result of the market's expectation that the Fed will do everything possible to prevent a rebound in short-term rates at least until an economic recovery is well underway and financial strains ease,'' it concludes.
Chase Econometrics doesn't expect auto sales to really recover till the 1984 -model year at which time it foresees an annual sales volume of 10.5 million cars.
In 1985, however, the big break will finally come, if Chase is right in its forecast.
The organization expects auto sales in 1985 to finally break through the 1978 cyclical peak of 11.1 million units and end up with a new record of 11.3 million new-car sales.
If the '85 projection works out, of the 11.3 million car sales, 7.9 million will be domestic models, with imports accounting for the remaining 3.4 million.
Meanwhile, domestic carmakers continue to spend ''big bucks'' for future products, positioning themselves to take full advantage of any major auto recovery that may come.
The big missing ingredient is the timing of the rebound.