The Crystal Balls Are Coming Out

December 10, 2001

Sacramento - Normally it's in the September-October time frame that the cadre of automotive gypsies whip out their crystal balls and begin forecasting how good, or how bad, automotive sales will be in the next year. This year was somewhat different, however, and the crystal balls remained in their leather bags because in September it was impossible to forecast how this year would end, much less give predictions for next year. Let's face it, on September 11, no one had any idea if there would be another car sold in the U.S. before the end of the year.

Now with November behind us, and after one of the most aggressive marketing ploys the auto industry has ever exercised, this year should finish as the second best year in history. And now that this year is essentially a fait accompli, the crystal balls are out of their bags and there are forecasts that range from next year being a record year for the auto industry to a dismal year.

Who knows what next year will be like. As we reported last week, many analysts believe that the zero percent financing incentives have succeeded only in selling next year's vehicles this year. That's probably not true, at least to a large extent. While zero percent financing is an attractive incentive, one doesn't go out and buy a car unless they really need or want one, especially in a slow economy.

Vehicle sales next year are likely to hinge on two factors. The economy will obviously play an important role and if it improves, along with job stability and growth, pay raises, and all the other factors that affect consumer confidence, then consumers are likely to shop for new cars.

The second important factor will be marketing, and not just aggressive marketing, but what automakers offer to the consumer in the way of something new. U.S. consumers are tired of battles between tire companies and car companies. If it isn't right, then fix it, but don't argue about it on TV. Consumers may be ready to buy into the host of telematic options automakers are dying to load onto vehicles. If the automakers are prepared to make consumers understand that they need this stuff, it could turn out to be not only a decent sales year, but a profitable one as well.

Anyway, that's what our crystal ball says.